Europe
After starting the day in a fairly positive fashion European markets slipped back from their intraday highs heading into the US open, struggling for traction despite an upbeat UK construction survey and some positive economic reports out of the US.
While today’s positive US data has pulled Europe’s markets off their intraday lows, investors remain reluctant to load up too aggressively ahead of this week’s ECB rate meeting and this appears to be limiting the upside potential, as investors weigh up the likelihood of further action at Thursday’s meeting.
Mining stocks have led the gains here today after the Australian government finally arrived at a deal to abolish the highly controversial mining tax. The 22% tax on coal and iron ore profits was introduced in 2012 by the then Labour government but caused deep divisions within Australia, particularly amongst communities which were heavily reliant on the industry. Amongst the gainers Bhp Billiton (LONDON:BLT) and Anglo American (LONDON:AAL) had led the sector higher.
Astrazeneca Plc (LONDON:AZN) shares are leading the fallers after CEO Pascal Soriot played down the prospect of the possibility of another bid by Pfizer Inc (LONDON:PFZ).
Yesterday’s biggest gainer ITV (LONDON:ITV) is currently amongst the biggest fallers as optimism ebbs away that US TV giantLiberty Global plc (NASDAQ:LBTYA) might be tempted to make a play for it.
Defensive utilities are also on the back foot today with Scottish and Southern, and United Utilities on the slide, while gold miner Randgold Resources (LONDON:RRS) was also under pressure after gold prices slid to a one month low.
US
US markets returned from their long weekend, with the S&P 500 opening at a new record high on optimism that this week’s economic data will confirm that the US recovery is on track.
M&A remains in the spotlight after Dollar General Corporation (NYSE:DG) upped its bid forFamily Dollar Stores Inc (NYSE:FDO) to $80 a share, up from its original $78.50, and also higher than Dollar Tree Inc (NASDAQ:DLTR)'s $74.50 bid.
Also in the news Apple Inc (NASDAQ:AAPL) is in focus on the back of some unwelcome headlines on reports that its on-line storage service iCloud might have been hacked with the result that the details of some well-known celebrities were leaked on line. More worryingly it is claimed that some of these files had been deleted, and yet they still appeared on-line.
This has inevitably raised concerns about the resilience and security of the company’s on line storage service, really bad timing ahead of its product launch on September 9th. The share price doesn’t seem to be too concerned, hitting new record highs, ahead of next week’s launch
What this episode does do is also raise concerns about the security of other on-line storage services like Google docs and Microsoft’s One Drive. I’ve always had my doubts about the security robustness of cloud based services and incidents such as this simply reinforce those concerns. We need to be confident that when we put personally sensitive material on-line, in the Cloud, including payment information, that it is safe from potential breaches.
These companies need to do more to assuage concerns that our personal data is safe and further more when we delete it, it stays deleted, and cannot be recovered
As far as economic data is concerned the latest ISM manufacturing report for August came in ahead of expectations at 59, while new orders hit their highest levels in 10 years, further raising the prospect that interest rate rises could come sooner rather than later.
FX
The US Dollar has had a strong day as markets start to price in the end of QE and also start to look ahead to when interest rates might rise in the US, with the US dollar index pushing to its highest levels since July last year.
The biggest decliners have been the AUD/USD after the RBA left rates unchanged and warned that the growth outlook for the Australian economy could be challenging. The NZD/USDhas also had a poor day on the back of falling milk powder prices, a key export.
The GBP/USD has also slid back despite a much stronger than expected construction PMI number for August, hitting its lowest levels since March, with some speculation that the narrowing yes vote in the Scottish referendum is starting to spur some sterling outflows.
While there might be some truth in this on the margins, this may be overstating it somewhat given the fall in sterling is pretty much in line with other currencies, and it still remains well above its lowest levels this year, unlike the euro which hit one year lows, earlier today.
Commodities
gold and silver prices have been slapped today in the face by a US dollar that is starting to recover a lot of its lost mojo as markets start looking to price in the end of QE next month. A continued improvement in US economic data is driving investors away from the precious metals space as economic data continues to point to an improving economy.
Concerns about Ukraine are being put to one side across the board with oil prices also falling sharply despite the better than expected US economic data for today. Both Brent Oil and Crude Oil prices have remained soft throughout the day as concerns about the rest of the world’s demand outlook outweigh an improving US economy.
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