Europe
The bounce at the tail-end of last week hasn’t lasted the weekend with shares sold off again on Monday thanks to disappointing corporate earnings adding to a backdrop of global growth concerns.
IT firm SAP AG O.N. (NYSE:SAP) dragged down the German DAX only for the US tech heavyweight IBM (LONDON:IBMI) to add to the woes with a huge earnings miss and forecast downgrade before the open of US markets.
The FTSE 100 was smacked down to below 6,100 on Thursday, only to recover to above 6,300 a day later. The lower market again today is symptomatic of an uncertain marketplace that now has both willing buyers and sellers.
Markets have been dominated by one single large buyer (The Fed), but with quantitative easing scheduled to end in nine days, the era of free money is coming to a close so markets are no longer a one-way bet.
Economic fundamentals are now playing a bigger role and they are deteriorating in some major centres across the globe, including those of Germany and China.
Germany reported flat producer prices in line with expectations for a drop of 1% year-over-year but more widely-watched will be the manufacturing and service PMIs released later in the week.
The ECB began its purchases of covered bonds today as announced in its latest policy meeting with short-dated French notes and other Spanish securities apparently first on the shopping list. The purchases themselves should have little market impact but the number of transactions in the days to come will give an indication the ECB’s intended pace of intervention.
Spirit (LONDON:SPRTC)has received another takeover offer from brewer rival Greene King (LONDON:GNK) for 109.5p per share. The Spirit board look set to approve the offer contingent on due diligence. Spirit shares were up over substantially with the market reacting favourably to the prospect of cost synergies and combined beer sales into the larger estate.
Shares of Adidas (XETRA:ADSGN) were higher thanks to a report that the Abu Dhabi government was part of an investment group interested in buying the Reebok brand.
US
A big miss in IBM earnings sent the Dow Jones and other stock indices distinctly lower into the open today having missed both the top and bottom line and scrapping its 2014 guidance. IBM is considered a bellwether of the US economy and also has significant overseas earnings exposure which feeds into the global growth concerns that have preceded this reporting season.
Apple Inc (NASDAQ:AAPL) report earnings after today’s closing bell and have the opportunity to undo the damage inflicted by IBM should the numbers and metrics beat estimates.
FX
The US Dollar was mostly lower against major currencies today thanks to comments from non-voting St Luis Fed President James Bullard last week suggesting the end of QE should be delayed.
The US economy demonstrated a seven year high in consumer sentiment on Friday and the unexpected drop in unemployment claims suggests a strengthening labour market. Paradoxically the US economy’s relative strength has seen the Fed concerned about the problems abroad and any possible knock-on effect.
Commodities
Gold made another run at $1,250 per oz today after faltering there last week, continuing the rebound from the $1,180 lows as stock markets continue to stutter in a risk-off environment.
With OPEC seemingly waiting until its next meeting to make any possible production cut, crude oil prices plummeted again today having rallied off a low of $80 per barrel in WTI last week.
Copper investors looked trigger-happy going into tomorrow’s China GDP data widely anticipated to have drop to 7.2% year-over-year in Q3, even a moderate decrease in growth within China can have massive implications for copper demand.
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