Europe
While Asian markets are still caught up in the uncertainty surrounding Hong Kong’s pro-democracy protests, markets in Europe and the US took weak global economic data as a positive for further central bank stimulus.
The Chinese HSBC manufacturing data dropped below expectations to just inside of expansionary territory to 50.2, Japanese industrial production in August fell by -1.5% when a rise was expected and Eurozone annual price growth got even closer to deflation at just 0.3%.
The Fed will end its quantitative easing program next month so markets are in search of an international money-printer to takes its place and support the bull market; the weaker the respective economic data the greater the chance of QE.
The rather tepid rally off the lows made on Thursday suggest perhaps markets are not convinced international central banks will engage in more stimulus or more to the fact whether it would actually work.
The IBEX 35 was a top performing index in Europe after Spanish PM Mariano Rajoy said he is legally appealing Catalonia’s independence referendum on November 9th, calling it anti-democratic.
Uncertainty over a Catalonian referendum has hit Spain much the same way possible Scottish independence did the UK and has halted the IBEX in its attempt to push through to new four year highs.
Spain's economy has been faring better than some of the core counties this year after instituting some needed structural reforms. Catalonia is a big contributor to Spain's economy and its separation would be a major loss to the country, not to mention a costly process.
Mr Rajoy could be doing Spain a disservice; polls suggest 50% of Catalonians would want independence so not being offered the choice through a referendum may provoke dissent and more uncertainty in financial markets.
In the UK, the FTSE 100 is being led lower by Next which warned on third quarter sales blaming the weather and Persimmon (LONDON:PSN), Intu Properties Plc (LONDON:INTUP) and Travis Perkins (LONDON:TPK) which took a knock lower from Nationwide reporting a monthly fall in UK house prices. Intertek who have appointed a new CEO was a top riser as was Royal Bank of Scotland Group PLC (LONDON:RBS) which said it will significantly outperform previous guidance of £1bn in bad loan losses.
US
The advance in US markets was stalled in early trading after disappointing housing and confidence data sent shares back and forth in choppy trading while shares in eBay Inc (NASDAQ:EBAY) were suspended after the company announced it will spin off PayPal into a separate company.
Shares in eBay have been halted on the news activist investor Carl Icahn has got his way on his insistence that eBay spins off PayPal into a separate company. EBay shareholders will now likely have their shares split into shares of both companies.
Icahn who was earlier chasing Apple Inc (NASDAQ:AAPL) to put its cash balance to more effective use has now benefited from the company’s announcement of Apple Pay which would be a direct competitor to PayPal. EBay management who rigorously dismissed the possibility of PayPal splitting from eBay have clearly had a change of heart in the thinking that competitors such as Alibaba Group Holdings Ltd (NYSE:BABA) and Amazon.com Inc (NASDAQ:AMZN) would be more prepared to use PayPal were it not under a competitor’s roof.
Close attention is being paid to the trial which began yesterday between American International Group Inc (NYSE:AIG) shareholder and former chief executive Hank Greenberg and the US government including the Federal Reserve and the US Treasury over the handling of AIG’s 2008 bailout. Should the terms of the bailout be found to be illegal it could have wide-ranging implications for past and future bailouts, and it is for that reason the US government will be determined to win the case.
FX
The US dollar was mostly higher today except against the Australian and New Zealand dollar who were bouncing back from key support levels.
Further declines in AUD/USD below 0.8660 would put the pair at loss for 2014 while NZD/USD would be the lowest in over two years should it break 0.7690.
Speculation that the ECB is close to full-blown QE sent EUR/USD and EUR/GBP lower. The euro has hit two year lows against the US dollar.
Mario Draghi has ruled out another interest rate cut so the focus is on the existing TLTRO and ABS purchase programs but confidence is not high that these can make enough difference. The TLTRO program has not had a good take-up by banks because of weak loan demand and the ABS market is possibly too small to generate the kind of liquidity needed to pump up the Eurozone.
Commodities
Silver was being sold off heavily again today and is approaching $17.07, a low from May 2010. Any remaining geopolitical tensions are being trumped by the rallying dollar and diverging global monetary policies.
Crude Oil prices were feeling the heat from a stronger US dollar as WTI dropped over 1% below $94 per barrel
CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.