Indices bounce after weak jobs report
Russia open to oil discussion; oil jumps
ITV (LONDON:ITV) brushes off rugby failure
Twitter (NYSE:TWTR) confirms Dorsey as CEO
Currencies flat as services data miss across the board
UK & Europe
European stocks jumped at the start of the week, encouraged by a positive reaction in US markets to the weak US employment report that spawned the biggest daily reversal for the Dow Jones Industrial Average in four years.
The Fed and Bank of England on hold at zero rates and pressure on the ECB to consider more stimulus has been, on balance, enough to outweigh growth fears.
The French CAC led the way after service sector data from France beat expectations but disappointment over services in the UK and Germany didn’t detract too strongly, with both the DAX and FTSE 100 seeing strong gains. PMI data showed UK services expanded at the slowest pace in more than two years in September.
Stocks with exposure to emerging markets and energy led the way on the FTSE. The reduced likelihood of a US rate-rise this year following a spate of disappointing economic data is buoying emerging markets. EM-focused bank Standard Chartered (LONDON:STAN) as well as Aberdeen Asset Management were top risers as were oil majors BP (LONDON:BP), Shell (LONDON:RDSa) and soon to be merged BG Group (LONDON:BG).
Glencore (LONDON:GLEN) was best performer with another volatile day, this time to the topside; on reports the company is looking to offload a stake in its agricultural business. Belief in Glencore’s solvency is at stake so raising cash through asset sales is the best thing management can do to stabilise the share price.
Shares of ITV could have been an obvious casualty from England’s group-stage exit from the Rugby World Cup but a rising tide lifts all ships and early underperformance gave way to decent gains on the day as the market rose. Estimations are for ITV to lose as much as £1m in ad revenue per match with many fans likely to tune out now that the England team is no longer involved.
Shares of Lloyds (LONDON:LLOY) were in demand on the announcement of a £2bn government share sale. The rise in Lloyds shares was generally in line with the rest of the banking sector. It’s been a bit of a topsy turvy few days for UK banks which face the prospect of an end to PPI fines but also a longer period of margin-eroding low interest rates after last week’s disappointing US jobs report.
Rolls Royce (LONDON:RR) was a top riser after the company announced it will shed 400 managerial jobs including some in the UK. The job losses are an effort to make cost savings in its marine division which has seen a drop in orders thanks to the fall in oil prices.
US
US stocks opened higher on Monday, building on the massive turnaround that began on Friday following the disappointing US unemployment report.
As was the case on Friday, energy stocks were top risers matching the rise in oil prices.
Shares of Twitter were higher by just over 1% on the news Jack Dorsey has been confirmed as permanent CEO. The added certainty of having a chief executive in place has offset some of the initial worries about Mr Dorsey’s appointment that sent Twitter shares lower when the rumour of his appointment first surfaced.
The ISM services PMI dropped to 56.9 in September when expectations were for a smaller fall to 57.5 from 59.0 in August. The new orders component fell to its lowest levels since 2008, though the employment component was up on the month. The data is the latest in a string of weak US economic data releases that cloud the prospect of a rate hike this year.
FX
The US dollar was mixed on Monday, losing out to commodity currencies but essentially unchanged versus the pound and euro after US, UK and European service sectors slowed in September.
The lowest reading on the UK’s service sector in over two years hurt the British pound. Forecasts had been for a pickup in activity in September so it was a large negative surprise. It appears the weakness that’s been present in manufacturing is creeping into other sectors, with those services tied into industry like transport faring the worst.
The euro was essentially flat following a bigger than expected slide in both manufacturing and services in the Eurozone. Fears over China’s slowdown and the VW scandal and its implications for European industry looks to have hit purchasing manager activity. Germany, Italy and Spain all missed September PMI expectations while France beat, coming off a lower base.
The Australian and New Zealand dollar were both firmer leading into the RBA policy meeting on Tuesday.
Commodities
The price of crude oil rose for a second day after Russia said it was willing to meet other producers to discuss the market. OPEC’s unwillingness to cut production has been based on the supposition that other global producers would match the cut with more output, resulting in OPEC losing market share.
If Russia were to cut oil output alongside OPEC, the combined market share could carry enough weight to impact prices, even if more US shale was produced in response. It could be an absolute game-changer. Oil prices could melt back up as quickly as they meltdown following OPEC’s failure to cut in 2014.
The strength in crude comes despite Saudi Arabia cutting prices it charges for oil heavily over the weekend, matching the cuts made by other Gulf producers in September.
Gold held onto its NFP-induced gains while silver rocketed over 3% higher to new three week highs in a sign that $14 per oz may be an interim bottom.
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