The Spanish stock market bounced back today, but there is still no political outcome on the horizon as the Catalan question lingers. 

Europe

The FTSE 100 came under pressure as sterling rallied on the back of the speculation that Theresa May will reshuffle her cabinet in order to reassert her authority on the party. Mrs May position has been weakened in the wake of the Conservative party conference, and the move could embolden her.

The stand-off between Catalan separatists and Madrid continues. The Spanish government has prevented the Catalan parliament from meeting today, but the chatter of Catalonia declaring independence from Spain hasn’t gone away. The IBEX 35 has bounced back today as tensions have cooled in comparison with early last week, but the market is regaining the ground it lost at the start of the month.

China’s service sector grew at its slowest rate in 21 months according to the Caixin survey. The second-largest economy in the world is trying to focus more on the services sector, and this update is a bit concerning. Broadly speaking the transition from a heavy industry economy to a services economy is going well. The softer than expected services report prompted traders to sell mining stocks like Anglo American, Glencore, and Rio Tinto, as they are concerned China’s economy is cooling. 

US

American equity markets haven’t moved much today and they are very near all-time highs. US stocks have been racking up new all-time highs lately, but the moves haven’t been massive. A slow crawl higher has been the method.

The US celebrates Columbus Day today so trading volumes are tipped to be low, and it is likely we won’t get into full swing until tomorrow.

Due to the nation holiday, we don’t have any economic announcements from the US today but investors are still thinking about the non-farm payrolls announcement on Friday. Now that US earnings are finally picking up, traders will want to see inflation edge up also. The wages figures have been lagging the unemployment rate, and when both are healthy, the US economy will be able to withstand a few rate hikes per year.

FX

GBP/USD gained ground today after Theresa May hinted at a possible cabinet reshuffle to get the party into line. The pound sold-off last week as there were growing rumours of a possible leadership challenge, and the talk of a re-jig to her team has injected some much needed optimism into the pound. Sterling was also helped by pullbacks in the greenback as it was hit by profit taking. There were many aspects of last week’s US non-farm payrolls report that we very positive for the US dollar.

EUR/USD is largely unchanged despite Germany posting solid industrial production figures. In August, German industrial production rose by 2.6% comfortably topping the consensus of 0.9%. Last week, we saw Germany factory orders jump by 3.6% in August too. These report are particularly impressive because the strong euro failed to curtail activity.  

Commodities

Gold has bounced back after hitting a two month low on Friday. The slight slip in the US dollar has also made gold more attractive to traders. The metal has been in a clear downward move over the past month, and seeing as a rate hike from the Federal Reserve in December is looking more likely, it is possible today’s positive move will be short-lived.

Brent Crude oil and WTI are higher on the day after OPEC stated that ‘extraordinary’ measures were needed to rebalance the oil market. The oil-producing group has a track record of talking tough, and not always delivering so traders aren’t overly fearful of any sudden change to supply. Adding to that, the cartel often has trouble reaching a policy that can be agreed upon by all its members, so this could be the beginning of talks about a possible shift in policy.

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