Today’s market action, where the FTSE 100 has definitively outperformed its continental peers, is almost the opposite of Monday. A strong showing from bank shares in the wake of the Bank of England’s stress tests, and an impressive bout of bargain hunting in mining firms following this morning’s China figures, put the index back on course for 6400.
Strong data from the eurozone has made investors jittery about the prospect of eurozone QE; having cruised serenely higher of late on assumptions that Mario Draghi will don his Santa hat early, it appears that markets are now having doubts at the eleventh hour. Certainly, it does seem odd to contemplate fresh easing when unemployment in the eurozone’s strongest pillar continues to touch fresh lows.
However, it was the US where the most interesting developments were to be found. After yesterday’s dire Chicago PMI number, Tuesday offered up the first contraction in the ISM manufacturing index for three years, as the overall figure hit a six-year low. This muddies the waters considerably on a Federal Reserve rate hike, and may well provide the cover the Fed seeks should it choose not to move in December.
Late-comers to the US dollar rally felt the pinch, as the Dollar Index trimmed gains made over the past two sessions, and while December still seems a likely possibility, the recent numbers will underline concerns that the Fed is too fixated with the idea of getting in a hike before the end of 2015.