Europe
The weakness in the pound has helped the FTSE 100 make headway north of the 7400 mark. The British index has made the most ground of all the European indices today.
The Spanish stock market is suffering after the violent images and footage that were broadcast around the world yesterday of the Catalonian independence referendum. The use of force by police officers shocked viewers around the globe, and the heightened tensions in the region have prompted investors to cash in their positions. Opinion polls in advance of the referendum suggested that the pro-independence side were in a minority, but I suspect Madrid’s actions will drive up calls for independence. The political uncertainty is weighing on their stock market, and until the situation is solved, traders will be wary.
Shares in easyJet (LON:EZJ) are up 5.1% today as the collapse of Monarch airlines makes the airline more attractive. The cancellation of thousands of flights by Ryanair (LON:RYA) recently was already helping easyJet’s share price as the Irish company endured damage to its reputation. EasyJet’s stock hit its highest level in over five weeks, and if positive momentum continues, it could target the August high of 1373p.
Barclays (LON:BARC) and Lloyds (LON:LLOY) are lower on the day after the Bank of England (BoE) stated that banks headquartered in the UK must find a net £4 billion in order to comply with the new regulations. Banks will have to obey the new rules by 2022, its aim is to make the UK banking system more secure.
US
US equity markets are still in their bullish form as the Dow Jones and S&P 500 set fresh record highs and the Nasdaq 100 is edging towards its existing all-time high.
Optimism surrounding Donald Trump’s tax proposals is still doing the rounds, and even though Mr Trump failed to introduce his reforms to healthcare, dealers are more optimistic about the tax cuts being brought in.
The US registered some positive economic indicators and that added to the feel good factor. The US ISM manufacturing report for September was 60.8, while investors were anticipating a reading of 58, and the August reading was 58.8. It was the fastest growth rate in American manufacturing in 13 years.
FX
The EUR/USD is weaker on the day as the greenback is still in demand. There were several manufacturing reports from the eurozone today, and overall they were broadly positive. It his hardly surprising that Germany has the strongest manufacturing sector. The situation in Spain isn’t really impacting the single currency, but it is far from assisting it.
Unemployment in the eurozone remained at 9.1%; the consensus was for a drop to 9%.
The GBP/USD is also suffering at the hands of the strong US dollar. In September, the UK manufacturing PMI report came in at 55.9, down from 56.9 in August, and economists were expecting a reading of 56.4.
Last month, the pound hit a 15 month high versus the US dollar, and even though the currency pair has been losing ground for over two weeks, the wider positive trend is still in place.
Commodities
Gold is in the red again as the strength of the US dollar and the risk-on attitude of traders has kept pressure on the metal. The record-highs in US equity markets and the rally in European stocks has encouraged traders to dump gold. The bullish move in the greenback is also making the yellow relatively more expensive.
The strong ISM manufacturing numbers from the US added to the argument the US central bank will hike interest rates in December.
WTI and Brent Crude have been hit by profit taking again after the energy market enjoyed a major rally in September. Tensions in the Kurdish region of Iraq have cooled somewhat, and there wasn’t the major disruption to oil production that some traders were expecting.
The Baker Hughes active rig count report last week showed that an increase of 6 to 750, it was the first jump in active rigs in four weeks.
Traders also suspect that demand in the US for oil could decline slightly, now that ‘driving season’ is over.
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