Europe
The FTSE 100 has been helped by the slide in sterling, and the index has it its highest level in over two weeks. The British equity benchmark has been edging higher recently and now that it finally broke above the 200-day moving average at 7335, we could see buying moment increase.
The slower than expected growth rate of British GDP softened sterling and accelerated the upward move in the FTSE 100.
The IBEX 35 has been broadly pushing lower since May and the Catalonian independence referendum at the weekend will be on investors’ minds. The Spanish equity index came under pressure last week when tensions were running high in Catalonia, and the market has been lagging behind the DAX and CAC 40 – which both hit three month highs today.
Shares in Carillion (LON:CLLN) are down 16% today after the company reported its interim-results. Today’s move must be put in context with the huge rally the stock enjoyed in the previous two sessions. The struggling company is still enduring problems but it could well be on the road to recovery. It is disposing of non-core assets, and it has secured a lending facility from a number of banks. Timing is everything, and if Carillion can manage to get their cash flow problem under control quickly, it could greatly increase their chances of keeping their head above water.
US
US equity indices are largely unchanged as the volatility index (VIX) remains relatively low. The American benchmarks are relatively quiet compared with their European counterparts, and traders are waiting to see how Donald Trump’s tax proposals play out.
The US President wants to cut US corporation tax to 20% from 35% and overhaul the personal tax systems also. Mr Trump failed to repeal Obamacare, but dealers seem more optimistic about tax reform.
US personal income and spending came in at 0.2% and 0.1% respectively, both met economists’ expectations. The core private consumer expenditure (PCE) index fell to 1.3% from 1.4%. This is the preferred measure of inflation by the Federal Reserve. The US central bank have left the door open to another interest rate hike this year, but traders may have their doubts if inflation is slipping.
The Chicago PMI report for September came in a 65.2, up from 58.9 in August, and the forecast was for 58.6.
The University of Michigan consumer sentiment survey dipped to 95.1, down from 96.8 in August. If the US central bank is serious about hiking interest rates, they need to be sure the American consumer won’t alter their spending patterns too much.
FX
The GBP/USD lost ground overnight and the weaker than expected UK GDP numbers added to the decline. In the second-quarter, UK GDP was 1.5%, while economists were expecting a reading of 1.7%, and the previous reading was 2%. The cooling of British growth will take some of the wind out of the hawk’s sails. Mark Carney, the Governor of the Bank of England (BoE) stated this morning that he was concerned about a pocket of risk in consumer debt.
The EUR/USD is higher today even though inflation in the region held steady at 1.5%, and missed analyst’s expectations of 1.6%. Earlier in the day, German unemployment fell to an all-time low of 5.6%. The single currency was given a boost by the drop in US core PCE to 1.3%.
Commodities
Gold is a lower and it has experienced some volatility on the day. The metal traded north of $1290 after the US core PCE report, but then printed a fresh low of the session in the wake of the strong Chicago PMI report – which came in at 65.2, easily topping the 58.5 expected.
WTI and Brent Crude lost ground today as it is believed that OPEC’s production for September increased by 50,000, and Libya increased production and Iraq registered a rise in exports. OPEC’s adherence to the production freeze was 86% this month, down from 89% in August.
Individual OPEC countries often look after their own interests first rather than what is best for the group, and when that happens it undermines the co-ordinated production cut. Saudi Arabia are talking about extending the production freeze by three months until the end of June 2018, but traders might take the warning less serious seeing as some members sometimes go their own way.
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