Against a backdrop of unrest and strikes across Europe, share markets have slipped back once more as investors once again adopt a safety first approach in the absence of any positive drivers.
Both Greek and Portuguese GDP numbers for Q3 starkly illustrated the economic malaise that Europe is currently buckling under, with annual GDP for Greece declining 7.2% and Portuguese GDP contracting 3.4%. The numbers don’t bode well for updated Spain, Italy, France, Germany and Eurozone GDP numbers due to be released tomorrow morning, with the Q4 numbers expected to be equally disappointing.
Eurozone industrial production for September also disappointed slumping 2.5% in September, below expectations of a 3% decline.
Today’s press conference by Bank of England governor Mervyn King also painted an extremely downbeat outlook for the UK’s economic recovery, downgrading its growth forecasts for 2013, with inflation continuing to remaining above target.
The governor pointed to an economy that would be susceptible to zig-zagging over the course of the next few quarters, while signalling that further QE, while not ruled out in the future, was likely to remain paused while the effects of the FLS were assessed, along with future levels of inflation over the next few months.
There has been some bright spots with technology stocks outperforming the broader index after US giant Cisco Systems beat expectations overnight, with ARM Holdings among the better UK performers.
After slipping yesterday, energy giant Centrica has bounced back, helped in some part by better than expected results from sector peer Scottish and Southern Energy, after the company posted a 38% rise in profits for H1.
Telecommunications have continued their recent wobble with BT Group slipping back after agreeing to buy Tikit Group for £64m.
Ex-dividend stocks are also providing a drag with Marks and Spencer’s lower, along with Royal Dutch Shell.
Supermarket giant Sainsbury’s has also had a pretty poor day despite posting an increase in profits of 2.5%.
US markets opened higher today led by technology stocks after Cisco Systems posted much better than expected results for its first quarter after the close last night.
Also on the docket were Q3 results for Abercrombie and Fitch which also came in higher than expected for the quarter while the company also raised its full year guidance.
Economic data proved to be somewhat mixed with retail sales for October coming in at -0.3%, though these numbers may well have been distorted by Hurricane Sandy. Business Inventories for September on the other hand came in above expectations at 0.7%.
Advances have been difficult to sustain, however ahead of the release of tonight’s minutes of the latest FOMC meeting, given comments overnight from Janet Yellen that the Fed may look at revising its forward guidance language to a more data targeted approach as opposed to a calendar based one.
It’s been a mixed day for the US dollar losing ground against the euro but gaining strongly against the Japanese yen.
The yen has slipped back sharply after the Japanese Prime Minister Noda announced that he would dissolve parliament with a view to holding an election in December, creating political uncertainty about the outlook with respect to any new PM. The likely new candidate could potentially adopt a much interventionist approach to weakening the yen.
The pound has slid back against the euro on the back of the Bank of England’s downbeat assessment of the UK economy, though against the US dollar it is pretty much unchanged. Governor Kings assessment that the pound is too high has also taken some of the shine off sterling longs.
The New Zealand dollar has also come crashing off after disappointing set of economic numbers last night, closely followed by the Australian dollar.
Crude oil prices have jumped back once again after news of fire fights breaking out in the Middle East as Israel launched an airstrike on Gaza killing a Hamas commander, in retaliation for rocket attacks on Israel earlier this week.
This has prompted retaliatory action and reignited the geopolitical risk premium trade over supply concerns in the event of an escalation, as talk of an Israeli ground operation gains traction.
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