It’s been a quiet start to the trading week as investors absorb the latest political events in Europe, from the unexpected election results in Germany and Austria, and ahead of the Spanish government deadline to authorities in Catalonia.
Catalan President Carles Puigdemont instead of pulling back from Catalonia’s claims to independence reiterated his policy of constructive ambiguity with a further call for talks with the government in Madrid in a letter to Spanish PM Mariano Rajoy. While Puigdemont still has a three day window to make his position clearer it is unlikely he will do so without risking the collapse of his Catalan government.
Spanish stock markets have slid back over concerns that this lack of clarity will prompt the Madrid government to implement article 155 of the Spanish constitution and impose direct rule, though at this point it’s not clear how he could reasonably implement that without inciting unrest in the region.
Basic resource stocks have been the best performers in Europe led by copper miner Antofagasta (LON:ANTO), while BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO) also doing well.
It seems somewhat ironic that at a time when central bank chiefs are expressing puzzlement at the lack of inflationary pressure in the global economy that commodity prices have been slowly accumulating gains over the course of the last five months.
This rise in commodity prices lent support to a positive Asia session after the latest Chinese inflation data showed that producer prices rose sharply in October to their highest level in six months. These price gains were in excess of most market expectations and driven by an increase in raw materials and construction spending, as the Chinese economy continues to feel the effects of a much stronger than expected economic performance this year.
As a result, we’ve seen copper prices push up to their highest level in three years, while palladium prices also rose to their best levels since 2001, as demand for the precious metal soars due to its use in pollution control devices as concern over vehicle emissions grows in the wake of recent scandals over pollution.
Rising tensions between Iraqi and Kurdish forces around Kirkuk has also helped push oil prices to their highest levels this month.
Among the worst performers has been medical devices company ConvaTec (LON:CTEC) who warned on that sales into the end of the year are expected to be slightly weaker than forecast.
US markets having finished last week at record highs look set to start another busy earnings week on the front foot, with all eyes set to hone in Netflix's(NASDAQ:NFLX) Q3 numbers after the company’s bumper subscriber numbers from its previous quarter.
Along with Amazon (NASDAQ:AMZN) the company is spending billions of US dollars in new content and while it is true the company recently added 5.2m new subscribers in the previous quarter to take over the 100m mark, there will come a time when it reaches critical mass in terms of how much subscriber growth it can add relative to capital expenditure.
Dow Jones is expected to open 31 points higher at 22,902
S&P500 is expected to open 2.5 points higher at 2,555.5
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