Yesterday saw another indifferent day on European stock markets, with a slightly lower close as we continue to look towards tomorrow’s ECB rate meeting in Malta.
The slightly weaker tone appears to have been prompted by a slightly better than expected credit conditions report from the ECB yesterday, which suggested that in parts, lending conditions were starting to improve in certain parts of the Euro area.
Combine that with a number of ECB council members saying that current policy is sufficient for now, and the prospect of the announcement of additional stimulus measures tomorrow may have receded somewhat, even though the prospect of it was a bit of a long shot in any case. In contrast a weak Japanese trade report has raised expectations that we could see further easing from the Bank of Japan at the end of the month, boosting Japanese markets.
US equity markets by the same token followed suit, closing slightly lower for the first time in three days. The overall narrative by and large this week has been one of earnings misses with IBM (N:IBM) sliding sharply after posting a sharp fall in revenues, after the close the night before.
The company also guided down its outlook for this year, as a result of the stronger US dollar, one of many companies in the past two weeks to do so, and probably won’t be the last to do so with Boeing (N:BA) coming out later today, and US economic bellwether Caterpillar (N:CAT) due tomorrow.
The main focus today in the US today is likely to be on the Ferrari (N:RACE) IPO which is due to shoot off the starting grid at $52 a share, valuing the company at $10bn. Fiat (L:0QXR) said the sale is designed to distinguish the brand apart from its more mass market counterparts, and fund investment in the mainstream company’s growth plans, which means the cash raised won’t be going back into the newly floated company.
This could be a problem, and while the appeal of owning a piece of such a marque or luxury brand has its obvious attractions, which explains why the IPO is oversubscribed, one can’t help feeling what the advantages of owning the shares would be to a potential investor. After all you can’t drive a share so unless there are certain privileges involved in being a shareholder like VIP access to the F1 paddock then the shares seem rather expensive. Let’s hope they don’t stall on the open.
The only data of note today is the latest UK public finance numbers for September which are likely to show a slight fall to £10.1bn after a slight rise to £12.1bn in August, after a surprise decrease in tax receipts, though government borrowing is still running below the same levels of a year ago.
On the announcements front Bank of England governor Mark Carney is due to give a speech later this evening outlining the banks analysis of the potential pitfalls in a UK exit from the EU. He told MP’s it will be “a bit of a yawner”
The findings are likely to be quite political, particularly if they come down one way or the other.
EURUSD – last week’s bearish key day reversal and failure to overcome the 1.1500 area keeps the pressure on for a move towards 1.1220 in the short to medium term which is where we have the 100 day MA. Range trading looks to be the order of the day here.
GBPUSD – another failure yesterday above the 1.5500 area continues to suggest that we may have to wait awhile for a move towards 1.5630. The market is still looking a touch overbought on the daily charts but less so on the hourlies. Support remains at 1.5420 and 1.5360.
EURGBP – is currently struggling to rally beyond the 0.7380 area which means we remain at risk of a move towards the 200 day MA at 0.7270, and the September lows at 0.7200. We need to see a rebound back through 0.7420 to retest the highs at 0.7495.
USDJPY – in a proverbial case of watching paint dry we continue to oscillate between the range extremes of 121.00 and 118.20. The bias remains to the downside while below the 120.00 area, with a break of 118.00 targeting the 116.00 August lows.
Equity market calls
FTSE100 is expected to open 30 points higher at 6,345
DAX is expected to open 44 points higher at 10,192
CAC40 is expected to open 24 points higher at 4,697
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