UK & Europe
Stock markets started November on the front foot after manufacturing data came in above expectations, lessening fears that China’s slowdown is weighing on the global economy. For multiple benchmark stock averages, October was the best month in years so the worry has been that it’ll be a tough act to follow.
The final Eurozone manufacturing PMI came in at 52.3 in October, ahead of the 52.0 expected and a rise over the 52.0 in September. The British pound soared after UK manufacturing surprised by rising to 55.5 in October against expectations of a fall to 51.3 from 51.8 in September.
One of the chief sources of distress for markets has been the impact on the more export-sensitive manufacturing sector from the China slowdown. Today’s manufacturing data implies concerns over the impact of China’s slowdown on manufacturing in the UK and Europe may be a little overdone.
Bank stocks were atop an otherwise lacklustre FTSE 100 on news they will receive a windfall from their stake in Visa Europe which is to be bought by Visa US. UK banks including Royal Bank of Scotland (L:RBS), Lloyds (L:LLOY) and Barclays (L:BARC) own Visa Europe as do multiple lenders across Europe. The windfall from Visa’s sale is a welcome change from regulatory fines that have recently seen funds travel more often out of banks than in.
The healthcare sector was one of the poorest performing sectors on the day as investors reacted unfavourably to the double blow of Hikma Pharmaceuticals (L:HIK) lowering guidance on its generic business and Shire announcing a takeover of US biotech group Dyax for $5.9bn.
Basic resource and oil & gas sectors haven’t taken too well the latest set of weak Chinese data. Anglo American (L:AAL), Antofagasta (L:ANTO) and Royal Dutch Shell (L:RDSa) were all top fallers on the FTSE 100.
HSBC shares fell after the bank reported poorly-received third quarter results. Lower fines helped HSBC report a 32% rise in pre-tax profits but the slowdown in Asia contributed towards a 4% decline in revenue. Shares are lower because the revenue-drop confirms fears over the impact of the slowdown in Asia and the delay in HSBC’s decision over moving its headquarters adds an unnecessary source of uncertainty.
US
A smaller than expected slowdown in manufacturing helped US stocks open higher on Monday, with even the Dow Jones rising despite a dip in Visa shares after it announced it will buy Visa Europe.
The US ISM manufacturing report for October declined to 50.1 when a drop to 50.0 was expected from 50.2 in September. The data was a little better than expected but doesn’t really add to or subtract from chances of a September lift-off from the Fed. Weakness in manufacturing, thought to be down to weakness in China and strength of the US dollar has been one of the major drags on the US economy.
FX
The dollar was mostly lower on Tuesday after underwhelming US manufacturing data which narrowly escaped contraction. In contrast manufacturing in the UK and Europe saw a surprise rebound, helping the pound and euro to modest gains.
Despite the All Blacks win on Saturday, the New Zealand dollar was a top FX faller as dairy prices continue to decline and expectations rise that the RBNZ may choose to cut rates.
Commodities
Gold and silver prices continued their multi-day declines on Monday as slightly-better than expected US data did little to soften the chances of a US rate rise in December.
A post-soviet era record-high level of oil production from Russia stunted the recent rise in crude oil prices. Brent fell just short of the psychological $50 per barrel.
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.