Europe
The upcoming January meeting of the Federal Reserve has given pause to European markets after the recent run up with fighting talk out of Athens adding some ‘Eurozone break-up’ jitters into the mix. The latest statement from the Fed should be a non-event for European markets that are being propelled higher by imminent ECB asset purchases but markets are on hold until the hurdle is cleared.
A massive risk-off scenario across Europe because of the problems in Greece is definitely possible in the near future but for now it is being contained within Greece with Greek bank shares and Greek government bonds getting sold off heavily.
A big move higher from Lanxess helped the German DAX back towards the peak on Monday above 10,700 and offset another day of weakness for bank shares with counterparty risk from Greece and from Siemens after weak earnings.
UK
UK shares were flat awaiting central bank action in the US with markets looking to the Fed smooth over global disinflation worries and green light the next leg higher on the back of the European Central Bank stimulus program.
The FTSE 100 was essentially unchanged hovering below the top of the long-term price range as gains from chip-maker ARM holdings got a boost from the record-setting earnings from Apple offset losses from copper miner Antofagasta which expects lower production in 2015.
US
US markets were going nowhere fast in anticipation of the January meeting of the FOMC as better earnings from Apple Inc (NASDAQ:AAPL) and Boeing Company (LONDON:BOEB) countered some of the poorer results seen recently but a drop in oil prices weighed on Chevron ahead of its quarterly earnings release tomorrow.
Apple results beat even the highest of company or analyst expectations as the new iPhone 6 and iPhone 6 plus smartphones flew off the shelves with the company selling 74.5 million iPhones in the quarter.
IPad sales declined but that is in part thanks to the popularity of the iPhone 6 plus moving into the phablet space that had been dominated by Android phones made by the likes of Samsung Electronics Co (LONDON:0593xq) . A multitude of new product lines were announced by CEO Tim Cook at the start of the quarter including the new Mac computer, Apple Pay as well as the Apple Watch which will start shipping in April setting up for a strong first quarter of 2015.
FX
The US dollar was mostly making gains against major currency pairs on Wednesday as speculation grows that the Fed will hold the course for a June rate hike in its latest statement.
Having hit 1.14, the EUR/USD gave back gains on Wednesday as concerns over Greece increased and the dollar strengthened heading into the Fed meeting.
Having rallied after the disappointing UK GDP report to 0.75, EUR/GBP slipped back by 50 pips as the UK stands relatively better positioned than other European nations were there to be any Geek contagion.
Commodities
The volatility in Greek assets may have suggested the need for a safe-haven but Gold and Silver traded in the red on Wednesday. Gold has been following its traditional pattern of sideways motion leading into the monthly Federal Reserve meeting.
Copper prices drifted back below $2.50 per lb on Wednesday towards the $2.45 which saw a big bounce on Monday. The drop in US durable goods orders reported on Tuesday doesn’t bode well for the prospect of US demand offsetting slowing demand from China.
Crude oil prices slipped on Wednesday with the Brent-WTI premium widening again after another week of huge inventory build-up in the US. The US is still drilling at a furious rate trying to recover as much sunk cost as possible in the hopes that oil prices recover before cash flows and credit dry up. Until such time that US drillers give up and the rig count drops, the upside potential for oil is fairly limited.
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