Concerns about the health of the global manufacturing sector has hit stocks hard today. 

Traders had gotten used to the idea that manufacturing in Europe is weak, but the disappointing US ISM manufacturing report sent the message home it is a worldwide problem. The US manufacturing report dropped to a 10 year low, which sparked a flurry of selling in Europe as well as the US. Manufacturing in China has been weak recently, so it is clear the US-China trade spat is hurting the global economy. In Europe, Spain, Italy, Germany plus the UK all posted readings that showed negative growth.    

Greggs shares tumbled throughout the session after the company posted respectable sales numbers, but the cautious outlook on account of Brexit weighed on the stock. Third-quarter sales on an annual basis grew by 7.4%, but the company expressed concerns about disruption to supply lines in on account of Brexit, so the group decided to stock up on ‘key ingredients and equipment’. The firm revised down the number of new stores it expects to open, as it now expects to open 90 new outlets, net of closures, while the previous guidance was 100. Some traders might be viewing the reining in of expansion as a sing the group is worried about the consumer climate, but sales are robust. Seeing as there are supply chain concerns, the tempering of expansion plans is no bad thing.  

Credit Suisse shares are a little lower today after it was revealed that the COO of the bank was fired for spying on a colleague. It was believed that private investigators were hired to track a Credit Suisse employee for fear the individual was going to poach clients and work for a rival.  The CEO, Tidjane Thiam, was not involved in the spying operation according to an investigation by the Swiss bank, but reputational damage has been done to the group.       

Ferguson posted solid full-year figures as revenue and profit increased by 6% and 7%, respectively with both figures exceeding equity analysts’ forecasts. The company recently announced it will demerge it US business from its UK operation. Today, the group confirmed the demerger process is ‘progressing well’, which added to the positive sentiment.  The firm has undergone restructuring in recent years, and further change are likely given the demerger.

US

Not long into the trading session the ISM manufacturing repot was announced, and the reading was 47.8, while economists were expecting 50.1. The update was the worst in a decade, hence why stocks moved sharply lower on the back of the announcement. The Fed cut rates twice since June, but until now there was a feeling the US economy was in good shape, but in light of the ISM update, some traders wondering are things going to get worse.

It was been a quiet day in terms of corporate stories in the US. McCormick shares are in demand after the company posted stronger-than-expected figures. Third-quarter EPS were $1.46, the consensus estimate was $1.29. Revenue for the period was $1.33 billion, while traders were expecting $1.31 billion. The company upped its guidance also as it now expects full-year EPS to be between $5.30-$5.35, while the previous guidance was for between $5.20 and $5.30.

Philip Morris was given an upgrade when Bank of America Merrill Lynch upped the stock to buy from neutral. The upgrades seems odd as traditional tobacco sales in the West are falling, and there has been a recent backlash against vaping in the US.     

FX

EUR/USD is higher on the session, and the decline in the greenback due to the ISM manufacturing report has played a big role in the euro’s move to the upside. Major eurozone economies like Spain, Italy as well as Germany all announced poor manufacturing reports. The CPI rate in the currency bloc slipped to 0.9%, from 1%, which highlights the fall in demand. The euro has the dollar to thank for today’ positive move.

GBP/USD is weaker due to concerns in relation to the Irish boarder in the Brexit negotiations. In next day we will hear Prime Minister Johnson proposals in relation to the Irish backstop, and traders are a little worried, as some feel it will be make or break for the talks.    

Commodities

Gold saw major volatility today as it initially pushed lower, keeping in step with its recent downtrend. The metal’s fortune turned around in the wake of the poor ISM manufacturing report from the US. Traders scrambled to buy up assets that are deemed to be safe havens like gold. If the metal can hold above the $1,480 mark, it might retest the $1,500 area.

Oil has been assisted by the OPEC report which showed that production in September fell to its lowest level in eight years. The production update from OPEC prompted short covering in addition to bargain hunting as the energy market has been under pressure recently as Saudi Arabia are now back to pre-attack production levels.    

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.