Sluggish Markets Await Earnings Season Start
UK stocks have been trading lower for most of the day today, but have rebounded a bit into the close. The FTSE and Sterling slumped to start the week after the IMF cut its GDP growth target for this year to (0.4%) from 0.2% and both industrial and manufacturing production came in below expectations. Later in the day, the NIESR estimated that UK GDP grew 0.8% in Q3 but suggested growth may slow again in coming quarters.
Continental indices were mixed with the Dax and IBEX down while the CAC and MIB have been posting gains. Greek treasury yields dipped below 18% as German Chancellor Merkel travelled to Athens to meet with her Greek counterparts amid more public anti-austerity protests. Problems in Greece and Spain dragging on and on have kept a cap on markets of late.
The BAE/EADS merger proposal has been in the spotlight again today with rumours coming fast and furious on negotiations ahead of tomorrow’s deadline.
US markets have started the day off lower, particularly the technology weighted NASDAQ 100 which has fallen 1.1% off the open. Edwards Lifesciences has dropped 17.9% following a profit warning.
The US appears to be in a holding pattern today as traders await Alcoa’s earnings report due after the close tonight. Expectations for the current quarter have been coming down in the wake of profit warnings from big names in recent weeks, but earnings and guidance could still have a big impact on trading over the next several weeks.
The greenback has made a bit of a comeback today with other majors giving back some of their recent gains, particularly EUR, SEK and DKK. The resource group has fallen less today, with rebounding commodity prices providing them with some support. CAD has seen some profit-taking off Friday’s rally as Canadians return to trading from a long weekend.
The energy group has strengthened today led by gasoline and UK crude oil, while US crude oil has reclaimed the $90.00/bbl level. This suggests that tensions in the Middle East have been underpinning an expansion in the political risk premium once again.
Natural gas has slipped back a bit but essentially continues to consolidate recent gains as traders look toward the start of home heating season.
Grains also continue to stabilize following recent corrections, particularly soybeans which have gained gained over 1.1% on the day as the harvest continues.