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It is a fairly quiet day in Europe with the expectation of the Spanish market, which has enjoyed a strong rally. 

Europe

The IBEX 35, is the by far the biggest gainer in Europe as the Catalan President, Carles Puigdemont, has fled the country. It says a lot about the Catalan separatist movement if its leader has ducked out of Spain. Mr Puigdemont wants to evade the Spanish authorities as he runs the risk of being arrested. A poll over the weekend suggested the Catalan nationalists could lose their majority in the upcoming December election. Investors are now less fearful about Catalonia breaking away from Spain, and they are quickly snapping up Spanish stocks.

British home builders such as Berkeley Group and Barratt Developments are lower on the day after Barclays issued a note stating to be cautious about the UK house building sector. Going on past performances, the bank stated the British government doesn’t have a great track record of fixing the housing market. Traders took this as a sign to cash in their chips in the stocks. Barratt Developments and Berkeley Group both hit record highs last week, so a bit of profit taking isn’t a major surprise.

HSBC posted a single digit rise in revenue and a tiny dip in adjusted pre-tax profits for the third-quarter. The bank saw profits jump by 448% - when you removed exceptional items, and this is a great barometer of how well the business is doing. It is far more profitable than other British banks like Barclays or RBS. The share price of HSBC is down 1.8% today but is still in the same upward trend it has been in since January 2016, so this weakness could attract fresh buyers. 

US

The Dow Jones and S&P 500 are in the red while the NASDAQ 100 hit a fresh record high. The stellar performance of tech stocks last week continues as dealers are looking ahead to updates from Facebook and Apple on Wednesday and Thursday respectively.

The US earnings season continues, but a lot of the big name blue chip stocks have revealed their figures already, so the Dow Jones and S&P 500 market may not be as influenced by corporate releases as they once were.

Traders have been bullish on US stocks recently as they have been waiting for Donald Trump’s tax reforms to be introduced, and now it appears the tax reforms could be gradual, and this is adding to the slide in stocks.

US personal income and consumption came in at 0.4% and 0.6% respectively, and both figures were improvements on August reports. The faster growth rate in consumption over income could suggest that consumers are using credit to increase their spending, and if that is the case, it could cause problems down the line.   

FX

GBP/USD has edged higher today as traders are focused on the Bank of England (BoE) meeting on Thursday, and the majority of traders are leaning towards expecting a rate hike. The greenback is weaker today, which is also helping the pound. The latest mortgage approvals and consumer credit figures from the UK were slightly mixed, as mortgage approvals fractionally dropped while consumer credit edged higher. Sterling has been on the rise against the US dollar this year, and the upward trend is still intact.

EUR/USD just about in positive territory, and on a day when the US dollar has seen a sell-off across the board it doesn’t give you much confidence in the euro. German inflation slipped to 1.6% from 1.8% in September – this is something what will worry traders as the eurozone has a problem with weak inflation.

The single currency is still suffering from the European Central Bank (ECB) update on Thursday, and as the door was left open for easing staying in place for some time, it will be hard for the euro to attract long-term buyers. The German CPI data feeds into this.

Commodities

Gold has crept higher on the day as the US core personal consumption expenditure (PCE) remained at 1.3% - the economic indicator is closely watched by the Federal Reserve, and no change on the month ensured a muted reaction from the market. Investor expect the US will announce the next chair of the Federal Reserve on Thursday. Apparently, Jerome Powell is President Trump’s favourite for the role. Mr Powell is neutral when it comes interest rates, so if he is selected for the role, we may not see any volatility in the gold market.

Brent Crude oil and WTI have been hit by the profit taking as the energy market has been strong lately. Today Brent Crude hit a 28 month high, and WTI reached a 7 month high as there is still talk that OPEC want to extend their oil production cut. The energy market remain choppy, and dealers were quick to take some money off the table after the multi-month highs were reached.  

The Baker Hughes active oil rig count showed the number of active rigs in the US declined in October for a third month in a row.  

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