Europe
European markets were having a necessary pullback on Wednesday. Recent gains in equities had started to appear stretched given that there has been no notable progress made in Greek debt negotiations.
Oil prices continue to dominate equity markets as Tuesday’s oil-inspired rally gets flipped on its head the next day with an oil-motivated fall.
A disappointing HSBC China services report overnight preceded a reserve ratio cut by the People’s Bank of China. The 50 basis point cut by the PBOC has not been taken as a big change in policy, rather just an adjustment, leaving markets to take the PMI data at face value, namely an indication of a slowdown.
The German DAX came close to hitting the psychological 11,000 level but fell just short and has since fallen back to as low as 10,800.
UK
The oil-effect lost some potency for UK markets on the back of a better than expected service sector data.
The UK Services PMI went up alongside most of Europe so can’t be held as an example of the UK showing signs of decoupling from the region’s troubles but is evidence of the lower oil prices feeding through to consumer demand for services.
The FTSE 100 is having a tough time at its multi-year upside sticking point of 6,900 which it did manage to at least surpass intraday on Tuesday before closing a tad beneath.
Sky, in its first report after BSkyB merged with European offshoots reported better than expected earnings with the highest UK customer sign-ups since 2005 sending it to the top of the FTSE 100. Sky has managed to dilute the threat from online streaming services like Netflix and Amazon Prime with its own low-cost online ‘Now TV’ offering.
Standard Chartered was one of the standout beneficiaries to the PBOC move to cut the reserve ratio given the bank’s Asian-focus.
Markets responded well to ARM holdings’ latest chip that already has customer sign-ups and proposes to be game-changing for the speed and graphics capabilities of mobile devices.
Hargreaves Lansdown Plc (LONDON:HRGV) was a big faller despite record assets under administration as inflows dropped by 20% causing a year-on-year dip in profits.
US
A rally in Walt Disney Company (NYSE:DIS) shares helped the Dow to small gains early on Wednesday but falling oil prices and unemployment data that missed expectations sent broader markets lower.
The ADP employment report indicated 213K private sector jobs were created in January, lower than the 225K expected although this was somewhat offset by a higher revision to December.
ISM Non-Manufacturing data for January came in ahead of expectations and the prior month but is still well down on the levels markets had been seeing as late as November.
Disney blasted over 7% higher to new all-time highs above $100 on Wednesday after having delivered another huge earnings-beat thanks to continued success in its motion picture and domestic theme park business.
The Avengers movies as well as the animated Frozen movie have been huge hits with massive merchandising power and this momentum is likely to continue with the release of the next episode of Star Wars in December. Theme park attendance has been sluggish abroad but domestically revenues jumped 9% year-on-year and lower petrol prices and airfares should only encourage consumers to make the trip to Disney World.
FX
The US dollar made a small comeback on Wednesday on a modest wave of safe-haven buying alongside the Japanese yen.
A better than expected UK services PMI following on from the surprise leap in the construction PMI on Tuesday helped GBP/USD back above the 1.52 handle. A move beyond 1.5270 would put sterling at its highest level in a month.
Having failed to hold above 1.15, EUR/USD dropped despite barring France what were generally positive European service PMI numbers. Uncertainty has crept back in over the potential for the ECB to scupper the positive momentum built up by the new Greek government by failing to maintain support for Greek banks.
Commodities
Gold and Silver traded higher today; a trend in recent sessions has been for gold to go the same way as the US dollar but the other way to oil prices as risk-on/risk-off trading dominates asset class rotation.
Oil prices declined after a sharp reversal from $54 in WTI crude and $58.50 in Brent as fears over decreased demand coming from China was brought back into play by the disappointing services PMI number.
Copper proved fairly immune to the possibility of stimulated metal demand as a result of the RRR cut from the PBOC and traded essentially flat.
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