UK & Europe
European rose for the first time in three days on Wednesday. The Euro Stoxx 50 index rose to 3469, its highest since Monday. Stocks in the UK pulled off three-week lows. The FTSE 100 rose as high as 6,327but was contained insideTuesday’s price range.
ECB president Mario Draghi expressing his wish for a European banking union did little to satisfy markets craving more talk of easy money. There had been an early lift from European Central Bank governing council member Ignazio Visco reiterating that a change in the bank’s asset purchase program and/or a lowering of the deposit rate will be considered in order to meet its inflation target.
Having avoided any large sell-off in the wake of poor Chinese economic data this week, markets have been able to look through weakness in the country’s industrial sector reported on Wednesday. Chinese Industrial production grew at a slower than expected 5.6% year-over-year. Appropriately on “Singles Day”, the country’s biggest shopping day, Chinese retail sales were reported to have grown 11%, the highest rate this year. China’s authorities will likely be pleased domestic demand is improving in the face of slower demand for its more export-sensitive manufactured goods.
SABMiller PLC (L:SAB) was a top riser on the FTSE after the brewer announced it had finally agreed a formal offer from AB Inbev of £44 per share totalling £71bn. Sector peer Diageo (L:DGE) was higher in tandem on expectation of further consolidation within the drinks market.
Shares of J Sainsbury PLC (L:SBRY) tanked to the bottom of the UK benchmark, erasing earlier gains after reporting an 18% drop in first-half profits and cutting its dividend. It’s the worst set of results since 2010 but sales growth in the supermarket’s ‘TU’ clothing and ‘Taste the difference’ food ranges made them better than expected. Sainsbury’s H1 results support the turnaround strategy put in place by chief executive Mike Coupe but shorter term investors are jumping ship after the dividend cut.
US
US stocks opened higher on Wednesday but gains were scuppered by mixed results amongst the nation’s top retailers including shares of Macy’s falling over 10% after a surprise drop in same-store sales. Bond markets were closed for the Veteran’s Day national holiday.
Shares of Alibaba (N:BABA) dropped despite reports of another record “singles day” sales event. The company continues to be used as a US proxy for Chinese economic health so shares dropped alongside industrial production figures.
FX
The dollar fell against most major currencies on Wednesday. The greenback has been moving between gains and losses this week, consolidating the gains made on Friday after the stronger than expected jobs report.
The pound rose on the day despite slipping slightly after the ONS reported slower than expected wage growth, supported by 5.3% unemployment, the lowest rate since April 2008. GBP/USD rose to a three-day high beneath 1.52. Governor Carney largely avoided the topic of monetary policy at the Bank of England ‘open forum’, instead suggesting bank regulation may have gone too far.
Commodities
The price of oil dropped again on Wednesday after a bigger than expected inventory build according to both the IEA and API added to oversupply concerns. So far US shale producers have managed to maintain production despite the fall in oil prices but Anadarko Petroleum Corp (N:APC)’s rejected offer for Apache Corporation (N:APA) may be evidence of some of the stress US shale firms must be under. Anadarko’s drilling failure rate has increased over the past three years, meaning rising costs for less production at lower prices; CEO Al Walker probably thinks there’s safety in size.
Copper touched a new 6yr low beneath $2.20 per lb as weak Chinese industrial production figures added to concerns of weaker global demand.
Gold and silver continue to languish at multi-month lows with nothing for the moment changing the belief in the market that the Fed is ready to raise rates in December.
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