Europe
Markets didn’t get the first quarter off to the strongest of starts today; the recent pull back in stock prices continued on signs that the US economy may be getting dragged down by slowing growth in other corners of the globe.
While the US economy is still improving, the economic performance of some major trading partners including Europe, China and Japan is falling back and that doesn’t bode well for the foreign earnings of US corporations.
The Eurozone Markit Manufacturing PMI data slowed to 50.3 and particularly concerning, Germany’s component of that slipped into contraction below 50 to 49.9.
European stocks were largely unmoved by the Eurozone PMI data but started to look hot under the collar when around mid-day there was talk of more sanctions against Russia should clashes in Ukraine continue, then pushed into yesterday’s lows on the release of disappointing US PMIs.
The Hong Kong protests look relatively benign for now but the longer they last, the more pressure there will be for authorities to act. Hong Kong and Chinese mainland may choose to follow the methods used in the US and UK to “occupy” protests by letting them linger on for a while until public attention moves on before having them removed by police.
In what could be viewed as backtracking and a hint of desperation, the People’s Bank of China eased mortgage policies to help prop up the nation’s ailing property market. Authorities are worried about the property market spill-over into the rest of the economy.
The Chinese economy is starting to slow so this is crunch time for Chinese authorities; they can either continue reforms and keep reining in credit or bottle it at the first sign of trouble and reflate the housing bubble again with more easing measures.
As David Cameron gave his speech at the Conservative party conference introducing a tax cut for middle income earners after the election, UK PMI data for September slowed along with the rest of Europe.
Tesco (LONDON:TSCO)’s was again a big faller today, at one point down another 4.5% on news the FCA will investigate its misrepresented profits.
US
US markets started the day in the red on mixed economic data that showed higher than expected job creation in the September ADP report but PMIs that fell short of expectations.
The Markit manufacturing PMI fell to 56.6, short of street expectations of 58.5 but still well inside expansion territory. More worrying was the employment component of the PMI which showed a significant drop and puts a dampener on prospects of a 200k+ number for the non-farm payrolls released on Friday.
General Motors Company (NYSE:GM) and Chrysler saw strong vehicle sales while Ford Motor Company (NYSE:F) and Toyota Motor Corp Ltd Ord (LONDON:TYT) struggled in September.
Shares in bailed-out Fannie Mae (OBB:FNMA) and Freddie Mac (OBB:FMCC) crashed by near-on 60% after a lost court case to force the companies to share profits with private investors.
FX
US Dollar was more mixed today as economic data disappointed all-round.
In Asian trading USD/JPY surpassed 110 for the first time since 2008 as weakness in Japan following its sales tax hike pushes the trajectory of monetary policy in the opposite direction to the US.
EUR/USD pushed into two year lows below 1.26. The euro fell after the European manufacturing data was released but did recover slightly following a matching data disappointment in the US.
Commodities
Silver saw a short-covering bear market rally surging by as much as 30c back over $17 per oz,
Brent and WTI crude oil also benefitted from a more subdued USD and reduced US oil stocks.
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