Europe
European stock markets are subdued as the German market is closed today as the nation celebrates Unity Day. Traders in the rest of Europe are content to standstill while the biggest economy in the Continent is on holiday.
The IBEX 35 is in the red as a general strike gets underway in Catalonia, as a reaction to the heavy-handed response by Madrid to the independence referendum on Sunday. Tensions are running high in the region and investors are giving the Spanish market a wide birth. The Spanish economy has been in recovery mode for the last few years and the Catalonian question could hamper the recovery.
In the past few days we have witnessed clashes between police and protesters, and a general strike –this evokes memories of the eurozone debt crisis. The situation is different, but the negative image it projects to the world is the same.
Shares in Ferguson (LON:FERG) are up 3.8% after the company posted a 25% jump in full-year trading profits, and like-for-like revenue increased by 6% on an annual basis. The firm announced a 10% rise in final dividend and a £500 million share buyback scheme. The share price hit its highest level since June, and if it clears 5172p, it could target the 2017 high of 5282p.
Greggs reported a robust third-quarter update, as the company saw a 5% increase in LFL sales for the period. The company is adding healthier options to the menu as they have proved to be popular with customers. The share price reached its highest level since January 2016 today, and the momentum is with the buyers.
US
Its business as usual in the US as the Dow Jones and the S&P 500 hit fresh record highs. The bullish momentum keeps rolling in American as the major indices notch-up new all-time highs. It feels like Groundhog Day as the markets keep edging higher and higher.
There has been no major change to the political or economic outlook to sway investors’ minds. Dealers are still optimistic about Donald Trump’s tax reforms being introduced. The US President is very pro-business and tax cuts for corporations and individuals, would be a fulfilment of one of his election pledges.
FX
The GBP/USD has fallen to a level not seen since mid-September. The pound was losing ground against the US dollar overnight, and the sharp contraction in the UK construction report added to the negative move. The UK construction PMI reading for September was 48.1, and that was a steep fall from August’s 51.1 reading. Since the reading came in below the 50.0 mark, it tells us that activity in the industry actually contracted last month.
The construction sector makes up only a small portion of the British economy, but it is something the Bank of England (BoE) will have to be mindful of if they are looking to reign in their loose monetary policy.
The EUR/USD has ticked higher despite the German finance houses being closed today as the country celebrates Unity Day. In terms of economic indicators, it hasn’t been too exciting either. Spanish unemployment increased by 27,900 last month, while the consensus was for an increase of 21,300.
The upheaval on the back of the Catalonia situation is being watched by traders too, but it hasn’t really impacted the single currency.
Commodities
Gold is broadly unchanged on the day as low volatility in global equities and the US dollar has taken its toll on the metal. It would appear that gold bears has paused to catch their breath for the moment, as the market has been in a decline for nearly one month, and we have yet to see any signs of a turnaround.
Gold is trading around its 100-day moving average at $1270, and a move below that metric could pave the way to retest the 200-day moving average at $1250.
Brent Crude oil and WTI are marginally lower today after a number of investment banks cut their price target for the energy, citing excess supply as the reason behind the price cut. The rally we saw last month could encourage shale producer to ramp up production, and in turn raise output.
The small increase in the number of active rigs in the US last week is also playing into the concerns that supply is a little on the high side.
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