Europe
Government bond markets continued to come under pressure today as investors continue to digest renewed hawkish commentary from various Federal Reserve officials, the latest being Dallas Fed chief Robert Kaplan saying it was time to normalise interest rates. St. Louis Fed President James Bullard also weighed in by saying that he would be surprised if the Fed didn’t raise rates in December.
European equity markets have also slid back with the weak euro and pound not really helping underpin either the DAX or the FTSE100, though today’s declines are probably more to do with some light profit taking after the big gains seen in the last few days.
The German DAX in particular continues to struggle anywhere near the 10,800 level having tried and failed to get above on it at least six occasions since August.
Rolls Royce (LON:RR) is amongst the biggest fallers after updating the market that its outlook for 2016 remained unchanged, despite the drop in the pound. The company cited weaker demand for industrial engines and servicing.
UK house builders can’t seem to catch a break as they continue to struggle to recoup their post Brexit losses. Barratt Developments (LON:BDEV) has slid back despite posting a jump in sales in their latest trading update. Total forward sales rose 4.3%, and the dividend payment was confirmed at £248m.
Banks have also slid back after enjoying the bulk of the gains in the last few days with Lloyds Banking Group (LON:LLOY) and Royal Bank of Scotland (LON:RBS) amongst the bigger fallers.
US
US markets opened slightly lower today with the continued rise in the US dollar, perhaps causing concern about the potential costs to US companies overseas profits. Given the strength of the US dollar, there has to be a question as to whether the 7 day rally seen in the Dow could well give way to some profit taking as we head into the end of the week.
Mondelez (NASDAQ:MDLZ) shares have come under pressure over concern about its declining market share and weak growth prospects.
Visa (NYSE:V) is also expected to be in focus after the company announced it was under investigation by the Federal Trade Commission.
In the retail sector, Target (NYSE:TGT) posted Q3 earnings of $1.04c a share, beating expectations of $0.83c while also seeing sales come in better than expected at $16.4bn. The company also nudged its full year forecasts slightly higher in anticipation of this month’s Black Friday shopping weekend which it could well help it meet the top end of its full year sales numbers.
On the data front, US PPI for October came in weaker than expected declining 0.2%, against an expectation of a 0.2% rise, on the month while the annualised number slipped to 0.8% from 1.2%. . Industrial production also disappointed coming in flat. This weaker number could well be down to either weak demand prompting lower prices or the recent strength of the US dollar weighing on import prices.
FX
The pound failed to get a lift from another fall in the unemployment rate to a ten year low, and a rise in wages of 2.4%. It would appear that the rise in the claimant count is acting as a counterweight to the good news on wages and the headline rate. October claims rose by 9.8k while September was revised up to 5.6k.
The Chinese yuan has also continued its decline sinking to its lowest level against the US dollar in eight years, as speculation about Fed rate hikes continue to push the Chinese currency lower, with the very real prospect we could see it hit 7.00 by the end of this year.
Bond markets have continued their decline after yesterday’s pause, with the US dollar continuing to edge higher, with the US dollar index pushing slightly above its 2015 highs at 100.51, to a 14 year high at 100.56 before slipping back. This strength has pushed the euro to its lowest levels this year against the greenback.
The biggest fallers have been the commodity currencies including the Australian dollar which has slid back on the back of weaker copper and iron ore prices.
Commodities
Oil prices have slipped back after yesterday’s price surge as doubts grow about the ability of OPEC members to agree anything ahead of this week’s meeting in Doha, as reports surface that neither Iraq or Iran are going to be in Doha. US inventories also jumped, coming in with a build of 5.27m barrels well above expectations of 0.4m barrels.
As far as OPEC is concerned, markets seem to think it will be less Doha and more Don’t Ha in terms of an agreement, this week. Sorry!
The recent surge in metals prices has also started to reverse in the past couple of days, with copper prices slipping back, and iron ore prices also lower.
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