- European shares, US futures extend gains on upbeat economic data
- NASDAQ bounces back but fares as October rout's biggest faller
- Yuan rebounds from lowest level in a decade on government's planned intervention
- Oil keeps sliding after hitting worst month in two years
Key Events
European stocks and futures on the S&P 500, Dow and NASDAQ 100 kicked off the month on the right foot, bucking a mixed trend in Asia.
The STOXX Europe 600 brushed off early hesitation caused by Credit Suisse's (SIX:CSGN) lower-than-expected net income results for the third quarter of the year, which clouded a 74 percent jump in profit for the bank. The pan-European benchmark extended its rebound to a fourth day, hitting its highest level in two weeks, helped by strong results from UK phone group BT (LON:BT) and Dutch bank ING (AS:INGA). Miners and automakers led the ensuing advance.
Earlier, during the Asian session, Hong Kong’s Hang Seng outperformed with a 1.75 percent gain, while South Korea’s KOSPI lagged, falling 0.26 percent.
Global Financial Affairs
Yesterday, in the US session, equities extended a rebound for a second day, ending one of the worst months of the decade-long bull run on a positive note. October's selloffs were steep enough to hit global assets across the board, including cryptocurrencies, which slumped near year lows.
The S&P 500 climbed 1.09 percent, capping its biggest two-day jump since February and paring the biggest monthly drop since 2011 to 6.94 percent. Technology (+2.38 percent) and Communication Services (+2.06 percent) led the advance, compensating somewhat for the rout they had sparked. Real Estate (-1.35 percent) and Utilities (-1.18 percent) underperformed. On a monthly basis, Energy (-11.33 percent), Industrials (-10.87 percent) and Consumer Discretionary (-10.10 percent) suffered double-digit percentage losses, while Consumer Staples (+2 percent) and Utilities +1.98 percent) were the only sectors in the green.
Technically, after the two-day rebound the S&P 500 found resistance by the broken uptrend line since the previous correction February 2016 and the 200 DMA, forming a bearish shooting star.
The Dow Jones Industrial Average edged 0.97 percent higher, paring its monthly drop to 5.07 percent. The NASDAQ Composite jumped 2.01 percent, outperforming other US majors, though it remains the hardest hit by the rout, losing 9.2 percent for the month. Big technology stocks, the culprits of the October selloffs, were pulled up by Netflix (NASDAQ:NFLX) (+5.59 percent) and eBay (NASDAQ:EBAY) (+5.87 percent).
FAANG stocks were boosted by Facebook (NASDAQ:FB) which topped the $1.46 consensus EPS with a $1.76 beat, though the social media heavyweight disappointed on revenue: the $13.77 billion revenue forecast actually came in at $13.73 billion. It was noteworthy that despite slowing user numbers, particularly in Europe—because of stricter privacy regulations and the social media's diminishing appeal to teenage users—investors demonstrated faith in the company, with demand orders pushing up shares by 3.8 percent on Wednesday. Technically, however, the stock is still under considerable pressure.
Investor sentiment was boosted by yesterday's ADP report of 227,000 new jobs in October, beating forecasts of 189,000 new jobs created. The reading marked the biggest increase in private sector employment since February, when the payroll processor agency reported 241,000 jobs. However, the current shifting market narrative is likely to soon turn this positive news on its head, moving the focus to the fact that the upbeat data will strengthen the case for the Fed’s path to higher borrowing costs.
The DXY confirmed a resistance signaled by a Shooting Star posted August 15. A selloff wiped two days of gains, and weakening momentum suggests a correction toward the bottom of a rising channel and the 200 DMA. See our Chart of the Day for a full report, scheduled to be published by 17:00 EDT.
Both the pound sterling and the euro surged after reports that UK and European Brexit negotiators have reached a tentative agreement to give UK financial services companies access to European markets.
In China, the yuan rallied from its weakest level in a decade as the country’s policymakers signaled that further stimulus measures are being planned.
Gold jumped on dollar weakness. Technically, it confirmed the integrity of an ascending triangle-bottom, reaffirmed with the 50 DMA (green) and 100 DMA (blue).
Meanwhile, oil prices extended a decline after hitting their worst month in more than two years.
Investors now face a mixed picture across markets after October turned into the worst month for global shares since May 2012. While macro headwinds abound, from European political jitters to slowing Chinese growth, equity bulls are hoping that some of the momentum garnered at the end of the month on solid economic data from the US can be sustained. The focus turns to Apple (NASDAQ:AAPL) earnings results today and to the monthly US jobs report tomorrow.
Up Ahead
- Apple, scheduled to report Thursday after market close, with a $2.78 EPS prediction, after $2.07 for the same quarter last year.
- Exxon Mobil (NYSE:XOM) is due to post corporate results Friday before market open, with an EPS forecast of $1.21, from $0.93 last year.
- The BoE interest rate decision and manufacturing data are coming out in the UK. IHS Markit will probably report a decline from 59.8 to 59.0 for October, while the Construction PMI probably edged down from 52.1 to 52.0.
- The last US jobs report before the November 6 mid-term elections may show that new hiring improved and that the unemployment rate held at a 48-year low.
Market Moves
Stocks
- The FTSE was edged up by 0.1 percent.
- The STOXX Europe 600 rose 0.1 percent to 362.00 as of 8:08 a.m. London time, the highest level in more than two weeks.
- Futures on the S&P 500 gained 0.1 percent to the highest level in more than a week.
- The MSCI All-Country World Index climbed 0.1 percent to the highest level in more than a week.
- The MSCI Emerging Market Index edged 0.6 percent higher to the highest level in more than a week.
Currencies
- The British pound rallied more than 1.3 percent to $1.2935.
- The Dollar Index gained 0.22 percent, paring an earlier 0.86 percent advance, up for the third session and on track for the higher close since June 19, 2017
- The euro climbed 0.4 percent to $1.1359, the biggest rise in almost two weeks.
- The Japanese yen was unchanged at 112.94 per dollar.
- The Turkish lira fell 0.8 percent to 5.63 per dollar, the weakest level in a week.
- South Africa’s rand ticked 0.8 percent higher to 14.6721 per dollar.
- The MSCI Emerging Markets Currency Index gained 0.2 percent, the biggest climb in more than two weeks.
Commodities
- The Bloomberg Commodity Index edged 0.1 percent higher.
- West Texas Intermediate crude declined 0.5 percent to $64.96 a barrel, the lowest level in more than 10 weeks.
- LME copper rose 0.6 percent to $6,026.00 per metric ton, the largest advance in a week.
- Gold climbed 0.7 percent to $1,223.17 an ounce, the biggest increase in more than two weeks.