German figures weigh on markets
A sunny start to the city's day was replicated by the market's cheery disposition. That optimism, however, quickly dissipated as the more tried and tested gloomy mood of European traders descended. Even the optimism in the run-up to the US market's open has quickly been quashed.
Today’s German trade balance figures have confirmed, rather than confounded, the growing fears that rather than leading its fellow members into a healthier recovery, Germany is being dragged ever closer to recession.
Worries surrounding the Spanish cases of Ebola and the possibility of further cases crossing the Mediterranean have once again seen both airlines and travel agents suffer.
One ray of light has been recruitment firm Hays posting improving figures, as it has seen skilled wages rise by 10% and revenues in the UK increase by 13%.
Alcoa and Pepsi figures impress
Last night’s Alcoa figures, its best in three years, and Pepsi’s expectation beating performance look to have set the tone for the rest of the US reporting season. Once again traders have been asking if valuations of US companies and their price multiples are warranted, but these third-quarter figures are doing their best to confirm that they are.
Last night’s Federal Open Market Committee minutes boosted US equity markets, as traders interpreted the dovish tones as likely to lead to a lengthier wait before the Federal Reserve embarks on interest rate rises. Considering the spluttering form of the eurozone a little more wriggle room for the Fed to work with could ultimately prove a useful addition.
Oil prices still heading lower
Conspiracy theories abound regarding OPEC’s over supply of oil to the markets; with Iraq’s supply chain, as yet, unaffected by ISIS, the spot prices continue to be forced lower. The next OPEC meeting is only a couple of weeks away and with the end of the driving season, oil prices could be set for a turbulent time. Throw into that mix a weakening US dollar and continuing wobbles from the eurozone, and you have some much muddied waters.
Cable and euro head higher
Although scepticism was high, the US dollar weakness and the continued moves higher in both the EUR/USD and GBP/USD are showing all the signs of being something more substantial than just a dead cat bounce.
Considering last night’s FOMC minutes had a distinctly dovish tone to them, this could be the catalyst to kick both the euro and pound out of the bearish funks. In contrast, the Bank of Japan will be sitting a little more nervously having finally seen a prolonged period of yen weakness; they will be reluctant to see a return to the status quo anytime soon.