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The fears that only 24 hours ago appeared prevalent have quickly been forgotten as markets happily latch on to positive news and conveniently ignore the less-than-impressive data out of mainland Europe. The raft of expectation-beating corporate data out of the US has added to the sense of wellbeing as market sentiment is once again bullish.
China data prompts risk-on trading
Yesterday’s corrective pull-back has been short-lived as the FTSE 100 has used the overnight Chinese manufacturing data as a catalyst to once again return to a risk-on way of thinking. With Asian markets pointing towards a resurgence in manufacturing, the UK mining sector has led by example and predominantly remained in the blue. This performance is even more impressive when considering the poor manufacturing and service data coming out of France, Germany and the EU this morning.
WPP, the world’s largest advertising company, have today posted third-quarter figures well ahead of expectations. Part of this might be due to the second and third largest advertising enterprises taking their eye off the ball as they look to secure a merger. The other half of the equation would be that the risk appetite of corporate firms has improved as they increase marketing spends on the back of improving market optimism.
Shire has left most of the FTSE in its wake as it charges higher following some standout third-quarter figures, leading it to upgrade growth targets for the year up to the mid to high teens. Aberdeen Asset Management has also stirred interest with its bold moves to acquire Lloyds' Scottish Widows investment arm, and the markets have rewarded this aggressive move with an almost 6% improvement in the share price going into the close.
US heavyweights unveil strong figures
The US reporting season is now in full swing, and Ford, Xerox, Coca-Cola and 3M have already reported better-than-expected Q3 figures today. We are still waiting to hear from Microsoft, Amazon and Zynga. With so many firms beating market expectations and the security blanket of the full US Fed QE process likely to remain in place for the rest of 2013, equities have had the freedom to set optimistic targets.
This afternoon's more convincing corporate figures have helped solidify the sense of optimism that European markets have held on to through the morning session. Even the mid-afternoon jobless claims that came in slightly higher than the markets would have wanted have been unable to derail the risk-on mentality of equity traders.
Copper pares gains after US data
Copper received a boost overnight after the Chinese HSBC manufacturing PMI report come in above analysts’ estimates. The October reading came in at 50.9, against the September reading of 50.2, and traders initially bought copper as the manufacturing sector in China is at a seven-month high. But weaker-than-expected updates from the US prompted dealers to take profit early.
Gold is once again looking to create another false dawn after ticking up $13.50, and is happily heading towards a solid week's worth of moves higher, but how long the precious metal can continue this trend is open to debate.
Norwegian krone outperforms
The Norwegian krone was the outperformer on the FX market today as a result of the central bank keeping its rate on hold. Norway still maintains a perfect credit-rating score, and the currency has become something of an attraction to currency traders.
The kiwi dollar would have benefited from better domestic and Chinese data today and having seen a decline of over 2.5% against the greenback over the past few days, any close above $83.25 should amount to a bigger bounce.
The euro continues to surprise, rising through the $1.38 level – a 23 month high against the greenback – and now looks to be on a trajectory to rise to the $1.40 level. While Mario Draghi’s attempts to talk down the single currency have been somewhat futile, a small and much-needed recovery in the dollar may help to level the score and remove some of the froth in this FX cross. The flash PMI data from the US has not helped in this regard, serving only to burden the US currency further today.