An initial boost from positive Chinese economic data fizzled out on Tuesday morning. European stocks have given up early gains to turn slightly lower. Market sentiment remains fragile ahead of key central bank meetings this week.
Two of the four big central bank meetings this week have come and gone with little fanfare. The Reserve Bank of Australia and Bank of Japan kept rates on hold. The RBA gave no overt sign of another interest rate cut being on the way which sent the Australian dollar slightly higher. The Bank of Japan cut its inflation forecast, sending the Japanese yen lower.
Oil and gas earnings as well as the positive reaction in metals prices to Chinese manufacturing data dominated proceedings on the FTSE 100. Gains in the shares of Royal Dutch Shell (LON:RDSa) have overcome the losses in BP (LON:BP) shares to send the oil and gas sector up by 1% to the top of the FTSE 100.
Both Royal Dutch Shell and BP both beat earnings expectations but Shell saw a return to profit growth, helped by its takeover of BG Group whilst profits at BP halved. It is the ninth consecutive quarterly earnings decline from BP. BP revising down its forecast for future oil prices has weighed on its forward earnings guidance but also importantly calls into question the sustainability of its dividend.
Mining companies including Anglo American (LON:AAL) and Antofagasta (LON:ANTO) gained on the prospect of higher metal demand from the manufacturing industry of world’s biggest consumer of commodities. The China Caixin manufacturing PMI rose more than expected to 51.2 in October from 50.1 in September.
The British pound gave up most of its early gains after UK manufacturing data for October slightly missed expectations. The UK Markit manufacturing PMI for October came in at 54.3, a slowdown from the upwardly revised 55.5 in September.
Sterling has been on a charge since late Monday afternoon when speculation began (or information leaked) that Mark Carney would extend his five-year stint as Bank of England Governor by an extra year. The kneejerk reaction was relief that Mark Carney is staying to oversee the Brexit negotiations. On further inspection, Mark Carney not serving the full eight-year term is either him snubbing Theresa May after her critical comments -or the Prime Minister is not as keen for him to stay on privately as she is publically. Neither scenario is a good sign for the independence of the Bank of England.
US stocks look set for a higher open ahead of manufacturing data with Pfizer (NYSE:PFE), Kellogg, Coach, Gilead Sciences (NASDAQ:GILD), Etsy and Square (NYSE:SQ) amongst the companies reporting third quarter earnings.
USA pre-opening levels
S&P 500: 6 points higher at 2,132
Dow Jones: 46 points higher at 18,188
Nasdaq 100: 14 points higher at 4,815
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