Stocks closed higher in Europe on Tuesday but not without a few jitters along the way after a surprise slowdown in German factory orders reignited growth fears. It was continued strength in the oil price coupled with a belief the Fed will not raise interest rates this year that finally propelled stocks back into the green.
Stocks in the US didn’t fare as well with weakness in biotechnology shares dragging on the S&P 500. The essentially unchanged finish to the Dow Jones Industrial Average is in part responsible for what looks like a mixed start to European equities on Wednesday.
Asian markets held firm overnight after the Bank of Japan chose to keep policy on hold, disappointing an outside possibility of additional stimulus to cushion the blow from a slowdown in growth in the region.
It’s been a strong few days for commodities. Silver gained near-on 10% in the past three days as expectations of a Fed rate hike faded and concerns have eased over the fate of China whilst local markets are closed for golden week.
Stocks have been taking their steer from oil prices, with the energy sector tending to lead the way higher or lower accordingly. The price of oil is being used as a proxy for the belief in global growth within markets. WTI crude oil rose to a one month high, up 5% on Tuesday after the US EIA published estimates of a slowdown in production following a reduction in capex from oil companies. Russia’s willingness to meet OPEC producing counties to “discuss” the oil market, a possible pre-amble to a joint production-cut has been supportive of the oil price.
Industrial production data reported by Germany, Spain and the UK for August will be of particular interest following the surprise slowdown in German factory orders. German August industrial production is expected to rise by 0.2% month over month after a rise of 0.7% in July while Spain is expected to see a contraction of -0.4% from 0.6% previously.
UK industrial production in August is estimated to have risen by 0.3% after contracting in July by -0.4%, while manufacturing production is expected to have risen 0.3% having declined by -0.8% the previous month.
EURUSD – The 200 DMA is proving support for the euro and helped the currency close near its daily high at 1.1272, beneath the 1.13 level which has been capping advances for the past two weeks. A close above 1.13 or below 1.11 is needed to trigger a trend.
GBPUSD – The pound has closed back above 1.52, with the 61.8% Fibonacci of the April through June rally providing support beneath for a return back into the 1.52-1.58 trading range.
EURGBP – The euro-sterling cross has still be unable to make a decisive move away from 0.74. Long-wicked daily candles show indecision.
USDJPY – The dollar-yen formed a small inside day, dropping slightly against the dollar, making no decisive move out of its 119-121 trading range.
Equity market calls
FTSE100: to open 3 points lower at 6,323
DAX: to open 12 points higher at 9,914
CAC40: to open 4 points lower at 4,656
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