tock markets in Europe and North America sold off to start the week as we continue to move through the weakest time of the year for equity markets. There were a lot of small things that came together to rattle the markets once again. The Dos spent much of the day on its back foot, bouncing a bit into the close after dipping below 16,000 briefly. Some of the factors impacting trading today have included:
Mixed comments from Fed speakers: NY Fed President Dudley indicated Fed remains on track for a 2015 increase with October definitely a live meeting. Chicago Fed President Evens (known dove) calls for no increase until mid-2016.
Economic data has been mixed. China corporate profits fell, USD personal income and spending offset each other. The best that could be said about the oil impacted Dallas Fed report is it wasn’t as bad as feared and wasn’t as bad as last month.
Increased political uncertainty in Europe after separatist parties came out on top in Spain’s Catalan regional elections, but short of a majority highlighting unhappiness among voters heading into federal elections in Spain and Portugal later this year.
Follow-through increases in political uncertainty in the US with the risk of a government shutdown growing as House Speaker Boehner plans to retire at the end of October with key budget, debt limit and other business related votes due through the transition.
Press reports suggest analysts have been cutting their Q3 earnings estimates for S&P 500 companies.
Press reports suggest Saudi Arabia sovereign wealth funds have been taking funds back from overseas wealth management accounts to the turn of $50-70 billion over the last six months to fund government operations so the country can wage its price war against the US. Apparently there also have been calls from within the Saudi royal family for change at the top.
Press reports suggest the IMF could be preparing to cut its global GDP growth forecast again next month.
It was also another rough day for individual stock and sector news.
Glencore speculation weak commodity prices could force a restructuring, press rumours grains division could be put up for sale
Valeant company subpoenaed by US congress Democrats to discuss “massive” price increases for two of its products. This hasn’t helped sentiment toward the biotech sector in general either as it comes under fire on several fronts over high pricing.
Freeport partial spinoff of oil and gas assets could be valued a lot less than what they are on the company’s books
Apple Apple sold a record 13 million plus new iPhone 6 models over the weekend, the bad news is the results are to be split over the next two quarterly reports depending on whether sales were made Fri and Sat, or Sunday onwards
Volkswagen press reports suggest it had been warned about emissions test cheating years ago, also the safety of the company’s bonds has come into question.
There’s a good chance that a short term US funding bill could pass that could push the budget crisis off to mid-December, about the same time the US hits the debt limit, meaning that we could have a US government shutdown over the holidays. Also, inflation pressures may be building as the core PCE inflation figure the Fed likes to use rose in line with expectations.
Combined, this all makes October now a more likely liftoff date for the Fed than December for 2015 particularly with several speakers signalling that it’s a live meeting for a possible rate hike.
Currency trading has been mixed today, there has been a partial flight to defense with JPY asnd CHF doing well but gold declining and USD in the middle of the pack. This suggests traders aren’t quite sure yet what to make of the duelling Fed speakers. CAD has slumped to join other resource currencies in the lower half of the league unable to avoid the anchor of a falling oil price. NZD and AUD have been among the worst underperformers.
Today is pretty quiet for scheduled Asia Pacific news. The main event is a Reserve Bank of India meeting where a 0.25% rate cut is expected. A cut and/or talk of more cuts could undermine confidence in the current environment with traders wondering how weak the world economy actually is because that impacts resource demand and corporate earnings assumptions. The surprise would be if they held rates which would be hawkish but could be seen as a sign of a stronger economy.
There have been no major announcements after the US close today.
Significant announcements released overnight include:
US personal income 0.3% vs street 0.4%
US personal spending 0.4% vs street 0.3%
US core PCE inflation 1.3% as expected vs previous 1.2%
US pending home sales 6.7% vs street 8.1%
US Dallas Fed (9.5) vs street (10.0) and previous (15.8)
Upcoming significant announcements include:
5:00 pm EDT FOMC Williams speaking
7:00 pm EDT Canada election debate
3:30 pm AEST India RBI repo rate 0.25% cut to 7.00% expected
8:00 am BST Spain retail sales street 3.2%
8:00 am BST Spain consumer prices street (0.5%)
9:00 am BST Norway retail sales street 0.3%
1:00 pm BST Germany consumer prices street 0.1%
8:30 am EDT Canada industrial prices street (0.5%)
8:30 am EDT Canada raw material prices street (7.5%)
10:00 am EDT US consumer confidence street 97.0 vs previous 101.5
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