UK & Europe
A third day of gains was always going to be tough without much on the calendar and following a week that saw European shares rise 5%.
Germany’s DAX continued its outperformance that saw it rise over 6% last week. A smaller than expected dip in German business confidence bolstered sentiment a little on the country’s benchmark stock index. Exporters listed on the DAX stand to benefit the most from a combination of a lower European exchange rate and higher demand that could result from China’s rate cut.
The FTSE 100 saw a modest decline on Monday, coming off the two-month high reached last week.
A slide in Apple shares (O:AAPL) weighed on the shares of iPhone chip-supplier ARM Holdings (L:ARM), sending it to the bottom of the UK’s main benchmark.
WPP (L:WPP) was a top-faller after a poorly received earnings update. WPP reported strong growth with like-for-like sales up 3.3% but concerns over “Mediapalooza,” a big rise in the number of companies reviewing advertising spending weighed on the share price.
Telecoms companies ITV (L:ITV) and Sky shares were weighed down by another drop in Talktalk shares as hackers threatened another cyber-attack. Investors don’t like uncertainty and Talktalk is still being a little loose on the details of what has happened and how much customer data was stolen. Shareholders won’t tolerate many more 9% down-days before calls for chief executive Baroness Harding’s resignation will get too loud to ignore.
Talk of a possible sale at Aberdeen Asset Management PLC (L:ADN) buoyed shares to the top of the FTSE, though gains were capped by a rebuttal from the company that a sale was a consideration.
US
Stocks in the US were sluggish at the open on Monday. There is nothing close to the kind of headline-grabbing earnings beats seen last week to help justify pushing shares even higher on Monday, but equally nothing to suggest the rally can’t continue. The surprisingly big drop in New Home sales coupled with falling oil prices were enough to nudge stocks lower.
New Home Sales dropped to 468k in September, the lowest level since 2013.
The chance of strong earnings released by Apple on Tuesday is being looked upon as the next possible catalyst for continuing last week’s equity rally.
FX
The US Dollar was mostly lower on Monday as New Homes sales dropped to the lowest level since 2013 in September.
Traders peeled back EUR/USD shorts put on surrounding the ECB meeting ahead of this week’s meeting from the Federal Reserve. The default assumption is that the Fed will hold off hiking again this week which by itself is dollar-negative. The eventual direction the dollar takes this week will rest largely with the language in the Fed’s statement.
The Japanese yen was one of the biggest gainers after a government spokesman deflated expectations that the Bank of Japan might introduce more stimulus at its October meeting.
The British pound rose slightly heading into UK GDP data released on Tuesday.
Commodities
The price of oil slipped further on Monday tracking a big 6% decline in Natural gas. Oil is extending its long side since WTI crude failed to close above $50 per barrel on October 9. The price now sits just above $43 per barrel, the floor that’s been in place since early September.
Gold found an interim base around $1,160 per oz, just above the peak reached on September 24. The long-term prospects for the precious metal are not favourable with the Fed still eyeing a rate rise but a short-term squeeze higher remains on the table while the Fed delays.
The reaction in base metals to China’s interest rate cut has been notable and may be pre-empting another drop on the next sign of instability or weakening growth.
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