Europe
Shares in Europe were mostly rising today although not at the frenetic pace of yesterday with the European Central Bank denying rumours of further stimulus and bank stress test results leaving investors undecided whether to believe the rumour or the denial.
The FTSE 100 stalled out at the short term top made on the 10th October around 6,400; digesting ECB rumours and mixed earnings from British American Tobacco (LONDON:BATS) and Glaxosmithkline (LONDON:GSK). Top UK banks were largely able to brush off rumours that banks in Europe would fail ECB stress tests when results are released on Sunday.
The ECB had to officially deny two reports; one relating to plans for additional asset purchases and another that eleven banks would fail the central bank’s stress test.
Spanish newswire Efe listed eleven banks who had reportedly failed the ECB bank stress test including banks in Cyprus, Portugal, Italy and Greece and the corresponding bank’s share prices fell on the news. The shares remained under pressure despite the ECB’s denial because if there were to be any bank failures; it’d most likely come from the PIIGS so that makes the story quite plausible.
The Bank of England remained on hold as expected according to the latest minutes; voting 7-2 to keep rates unchanged and 9-0 to keep the asset purchase facility at current levels. Cable and UK stocks head south following the release because while the voting was as expected, the minutes themselves were rather dovish with members citing multiple risks to the UK recovery.
Supermarkets were all falling today thanks to a combination of the Kantar data pointing to slowing sales and the Waitrose head Mark Price calling the business model of Tesco (LONDON:TSCO), Sainsbury (LONDON:SBRY), Asda and Morrison (LONDON:MRW)20 years out of date.
Spirit Pub Co Plc (LONDON:SPRTC) showed a 60% profit increase after agreeing to a takeover offer fromGreene King (LONDON:GNK) whereas Heineken (AMS:HEIN) who turned down an offer from Sabmiller (LONDON:SAB) missed estimates blaming bad weather.
US
Shares in the US edged higher in early trading thanks to better corporate earnings including strong results from Yahoo! Inc (NASDAQ:YHOO) and Boeing Company (LONDON:BOEB) which raised its outlook for the year as well as further evidence of waning inflation from September’s CPI easing pressure on the Fed to hike rates.
Higher food prices but lower energy costs contributed towards CPI remaining at 1.7% annual growth during September. Inflation in the US is showing no real sign of wage pressures thanks to the low-paid nature of a lot of the jobs that have been created since the financial crisis.
With conflicting price direction coming from food and energy prices; US consumers may probably won’t have any more disposable wealth and retail sales could remain stagnant.
FX
The US Dollar strengthened today after the US CPI report came in slightly stronger than expected despite core prices slowing in the month.
The euro came under renewed pressure thanks to rumoured bank stress test failures and the possibility of an expanded ECB bond buying program. EUR/USD fell back below 1.27 and could be in line to re-test the 1.25 low.
The British pound fell after BOE minutes were slightly more dovish than expected; GBP/USD fell to just above the key psychological 1.60.
Commodities
Crude oil prices rolled over again thanks to a stronger dollar and oil inventories much higher than expected; WTI has tried and failed twice in two days to get through $84 pb and could now be headed back down to $80.
Copper, having rallied after the better than expected Chinese GDP data fell back down again today alongside most commodities.
CMC Markets is an execution only service 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.