UK & Europe
Shares in Europe fell to three-week lows on Friday as the Euro Stoxx 50 fell as lows as 3,342, its lowest since October 22. UK stocks fell to fresh five-week lows on Friday, with the FTSE 100 dropping as much as 1% stopping just short of the 6,100 big figure.
There has been a sea change in short term sentiment with no major index left untouched by a general return to risk-off which left most sectors lower. The worst performer on Thursday, basic materials outperformed on Friday thanks to steadiness in oil and metal prices. One day doesn’t make a trend; commodities will need to show some solid evidence of at least a short term bottom before equities can chart a course back higher.
Shares in Europe slumped after German and Eurozone GDP growth slowed more than expected in the third quarter according to initial estimates. Germany's economy grew by 0.3% in the July-to-September period, down from 0.4% in the previous quarter. The main drag was foreign trade which was impacted by a stronger euro and lower demand for exports from emerging markets.
The weaker growth adds to the case for further stimulus in the Eurozone but does call into question how effective the policy is at spurring growth, or indeed inflation.
Shares of Swiss agrichemicals firm Syngenta AG (VX:SYNN) bucked the trend, rising over 6% on news it was the subject of a takeover offer from ChemChina. The bid from ChemChina appears a little cavalier given that the $42bn it’s put on the table is $7bn less than that offered by Monsanto (N:MON) three months ago. Perhaps the thinking was that Syngenta may view an offer from the Chinese state chemicals group as less of an issue for regulators. That doesn’t appear to be the case as of yet since Syngenta cited competition concern’s as a reason to rebut the offer. Once the pop and drop from Monsanto’s offer is stripped out, shares of Syngenta have essentially flat lined this year so management will be under pressure from shareholders to fully explore the possibilities with ChemChina.
Security firm G4S (CO:G4S) was top faller on the FTSE 100 after a broker downgrade. G4S shares have underperformed the market, down 10% this year. With no big contracts to offset likely higher costs from a rise in the national minimum wage, the downtrend in G4S looks set to continue.
US
US stocks were down in early trading with the Dow Jones on track for its worst weekly return in 12 weeks and the Nasdaq set to see five straight days of declines.
It was an ugly day for the retail sector after monthly retail sales and retailer quarterly earnings missed expectations. Shares of Nordstrom and Fossil fell by a massive 17% and 29% respectively after missing estimates.
FX
The Dollar was higher across the board on Friday, breaking a two-day losing streak as markets brushed aside weaker than expected US retail sales data in a belief the Fed will still raise rates in December.
There was delayed reaction over weaker than expected German and Eurozone growth figures, but once US retail sales data had passed, shorts pounced on the euro sending EUR/USD back on its way to 1.07 and EUR/GBP just shy of 3 month lows.
Commodities
An early positive reaction in oil prices following a report from the IEA gave way to selling by afternoon trading ahead of Baker Hughes rig count data.
A report from the IEA suggested higher stockpiles would impact crude oil prices. The agency’s prediction maybe a little dated; higher stockpiles have already driven the price of US crude down by 18% in the last month.
Gold, silver, copper and platinum prices fell in sync on Friday as metals continue to fall out of favour with speculators despite generally robust physical demand. Silver has now dropped for twelve days straight.
"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "