There was a major move to the downside in the Nikkei 225 overnight after Chinese President Xi hinted at increased trade with the US.
The prospect of China moving economically closer to the US, possibly at the cost of Japan, brought about a fast decline in the Japanese stock market. Traders in Japan typically pour into the yen during times of uncertainty, and that accelerates the decline in the Nikkei 225.
China’s stronger than expected CPI and PPI failed to boost commodity stocks in London. CPI and PPI came in at 1.9% and 6.9% respectively, while economists were expecting a reading of 1.8% and 6.6%. Demand is clearly strong in China and that will help Beijing achieve their growth target. The sharp sell-off in the price of copper overnight coincided with the drop in the Nikkei 225, so that is taking precedence at the moment.
Burberry posted a 24% jump in first-half pre-tax profits, but it still missed expectations. Traders were more interested in the company’s plans – which involves focusing more on the high end of the luxury goods market. The stores they are retaining will be revamped at a high cost – and this is spooking traders. The stock hit a record high yesterday, and is down 11.2% today. If the stock can hold above the 1700p level, it could re-target 2000p.
Sainsbury’s shares fell to an eleven month low today after the retailer revealed a 9% fall in underlying pre-tax profits. Like-for-like sales, not including fuel, increased by 1.6%, which tells us how competitive the supermarkets sector is, as squeezed consumers are more selective in their spending.
GBP/USD has drifted lower again, and we aren’t expecting any major economic indicators to be released from the UK so market movements could be muted.
EUR/USD is broadly flat as the increase in German trade surplus wasn’t greeted with much of a reaction. In September, exports fell by 0.4%, but imports declined by 1%, so the trade surplus rose to €21.8 billion from €21.6 billion.
We are expecting the Dow Jones to open 43 points lower at 23,520, and we are calling the S&P 500 down 5 points at 2589.
At 1.30pm (UK time) the US will release the latest jobless claims report, and traders are expecting a reading of 231,000, up from 229,000 last week.
Macy’s will announce third third-quarter results today.
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