Europe
Shares in Europe took off today with the Spanish IBEX 35 and Italian FTSE MIB both rallying over 2% thanks to better than expected growth in China and speculation the ECB is considering widening its asset purchase program to include corporate bonds in an effort to boost business lending.
China GDP’s increased at an annual rate of 7.3% in the third quarter according to the official government report, beating estimates of 7.2% growth. Markets were pricing in 7.2% so 7.3 just required an upwards adjustment in stock and commodity prices.
Commodities and commodity stocks were the biggest beneficiaries from China’s improved growth prospects and the possibility of stronger commodity demand. In the UK, BP (LONDON:BP), Petrofac (LONDON:PFC) and Tullow Oil Plc (LONDON:TLW) were top risers thanks to move higher in crude oil prices.
The China GDP effect may be short lived, 7.3% is the worst quarterly performance in 5 years and sets up annual growth to be the slowest in decades. The trend is clearly down; the first quarter expanded at 7.4% and the second quarter 7.5% so another quarter below 7.5% and the Chinese government will have missed their growth target.
Bank shares in the peripheries of Europe flew higher on a Reuters report the ECB is considering buying corporate bonds with a decision to come as soon as December with purchases to begin early next year. In the UK Royal Bank of Scotland Group PLC (LONDON:RBS), Lloyds Banking Group Plc (LONDON:LLOY)benefitted from bank sector strength in Europe.
The FTSE 100 continued to push up from last week’s lows around 6,100 to the highest level in two days. A sustained move above 6,400 would increases chances at least a temporary bottom has been put in for the UK benchmark.
Profits were not down as much as expected at Asos (LONDON:ASOS) and shares rallied over 15% today. Shares were down as much as 60% this year as the company embarks on a clear strategy of investing in its infrastructure at the expense of profits. The company has guided that the next year will likely see similar earnings growth while investment into warehousing and overseas sales continues.
US
Corporate earnings were mixed in the US in early trading with Apple Inc (NASDAQ:AAPL) and Chipotle Mexican Grill Inc (NYSE:CMG) easily beating expectations but Coca-Cola Enterprises Inc (NYSE:CCE), McDonald's Corporation (NYSE:MCD) and Verizon Communications Inc (LONDON:VZC) adding to concerns set-off by International Business Machines (NYSE:IBM) over the impact of global growth and a stronger dollar by missing estimates by wide margins.
US stock benchmarks chose to follow the earnings example set Apple in the context of improved Chinese growth prospects and the chance of further ECB stimulus.
FX
The euro lost out against major currencies today thanks to speculation that the ECB will begin buying corporate bonds as part of its asset-purchase program as early as December. The ECB would flood markets with freshly printed euros to buy these bonds, and there is a greater available pool of corporate debt than the covered bonds and ABS already disclosed.
Commodities
The better than expected Chinese GDP lifted most of the commodity shere today on the prospect of better than expected demand from the world’s second largest and commodity hungry nation.
Copper was a notable gainer rallying back through $3 per lb.
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