European equity markets got off to a strong start following a mixed session in Asia, but now the gains are evaporating as we approach the close.

Traders are keen to square up their books ahead of the weekend. The global equity rout originated in the US, and the moves continue to be US driven, and European dealers are keen to cash in their holdings as Wall Street still has several hours more trading left. 

Ashmore had a solid start to the financial year, and it was all the more impressive in light of the stellar year last year, where the firm had a record performance. Assets under management (AuM) ticked up by 3.4%. Blended debt and corporate debt jumped by 4% and 8% respectively. Emerging markets (EM) have been volatile recently so it is no surprise that AuM dipped by 5%. It is encouraging to see the company is performing well in choppy times in the financial markets.  

Man Group, the listed hedge fund, confirmed funds under management increased by 0.4% - a record level, but equity analysts were anticipating an increase of 0.5%. The firm is in the process of selling Nephila for $130 million. Man Group is planning on opening an office in Jersey, and it believes the move should help attract new client funds. The stock has been in decline since January, and while it remains below the 150p mark, its outlook could remain negative. 

Copper prices jumped today after under wrought imports into China hit a two-and-half-year high, and imports of copper concentrate hit a record high. The Chinese authorities are clamping down on scrap, and that has prompted the import of other variations of the metal. Even though the official China trade data showed that total imports undershot expectations, and showed slower growth, the red metal still rose. Mining stocks like Rio Tinto, BHP Billiton, and Glencore are in demand today on account of the copper move. 

US

Stocks have gotten off to a strong start as traders are swooping in and snapping up relatively cheap stocks. Bond yields are off the highs of the week, as sign that traders are a little less fearful about the prospect of higher interest rates from the Federal Reserve. Money was poured into bonds in the previous two sessions when traders dumped stocks.

JP Morgan and Citigroup both posted better than expected earnings per share (EPS) while Wells Fargo missed on EPS but exceeded analysts’ forecasts on revenue, and the bank confirmed that net interest income increased by 1%. The higher interest rate environment should help the lending divisions in the coming quarters.  

China reported an increase in their trade surplus, and their trade surplus with the US reached a record high. There is no evidence that the tariffs imposed by the US on Chinese imports have hurt trade. One could argue that it is early days yet, but there might not be much point in announcing more tariffs until we see we proof that the initial batch is actually damaging the Chinese exporters.

FX

EUR/USD is a little weaker on the back of the firmer US dollar. The final reading of German CPI for September came in a 2.2%, unchanged from the preliminary report. It is worth noting the August report was 1.9%, so the latest inflation figures saw a sizeable jump in demand. It is encouraging to see that demand is strong in the largest economy in Europe, but the report couldn’t overpower the US dollar.

GBP/USD is also in the red because of the rally in the US dollar. There were not major economic announcements from the UK today, so the pound is at the mercy of the dollar. There is a report doing the rounds that a breakthrough could be made next week in terms of the Brexit withdrawal agreement, and the two-day EU summit that begins on Wednesday could be the announcement day. Sterling has been pushing higher versus the US dollar recently, and while it holds above the 1.3000 mark its outlook could remain positive.

Commodities

Gold have back a small bit of the ground it covered yesterday, and the firmer US dollar hasn’t helped either. The drive higher that we saw yesterday could be a sign the metal is trying to snap out of the downtrend that began in April. Should the bullish move continue, the commodity could target the $1,236 region.

Oil is marginally higher as the market has settled down after a few volatile session. The big build in inventories that the American Petroleum Institute and the Energy Information Administration showed during the week is still playing on traders’ minds. Oil has also been influenced by the stock markets, as bearish sentiment in equities has prompted dealers to sell oil as a part of a wider bearish play.

 

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