Daily US Opening News And Market Re-Cap: October 24
- Lacklustre data releases from the Eurozone core weighs on the EUR, as German PMIs and IFO come in well below expectations.
- Q3 earnings season in the US continues, with both Boeing and Lockheed Martin beating expectations.
- Markets look ahead to FOMC rate decision as well as any commentary from ECB President Draghi's briefing with German lawmakers.
After absorbing the latest PMI reports from Europe, as well as yet another disappointing German IFO survey which in turn was followed by a sharp rise in volatility, saw equity markets in Europe print lows of the day. However ever since, equities staged an impressive recovery and are now in positive territory, supported by investors looking to capitalise on oversold conditions and in part by short-positions being squeezed. The sharp and unpredictable mood swings resemble one suffering manic depression and it remains to be seen whether stocks will be able to hold onto gains. The move higher in stocks has been led by the tech sector, which has been one of the worst performing sectors over the recent weeks. Looking elsewhere, EUR underperformed its peers, largely driven by a lower EUR/GBP (by-product of deterioration in EU credit markets, as well as good sized buying by a UK bank in GBP/USD).
Asian equities opened on the back foot after the sharp losses in the US yesterday. The Nikkei 225 closed lower by 0.67%, below the psychological 9,000 mark as investors sold off the firm gains registered in the index over the past 7 sessions. Over in China, a 3-month high in the HSBC Flash Manufacturing PMI at 49.1 (Prev. 47.9) has provided support for Chinese stocks, with the Hang Seng Index closing at a 2012 high of 21,763, up 0.3% at the close, and the Shanghai Composite holding on to 0.07% gains.
US House Price Index (Aug) was released early overnight coming in at 0.7% vs Exp. 0.3% (Prev. 0.2%, Rev. 0.1%). (Newswires)
EU & UK Headlines
Core European data has heavily suffered today, particularly in Germany, with flash estimates for Manufacturing and Services
PMIs missing expectations, in the first indication of Q4 GDP in the Eurozone. Following the releases, sentiment continued to worsen, but saw somewhat of a turnaround in the stock futures as US participants came to their desks.
European Manufacturing PMI (Oct A) M/M 45.3 vs. Exp. 46.5 (Prev. 46.1)
- European PMI Services (Oct A) M/M 46.2 vs. Exp. 46.4 (Prev. 46.1)
- European PMI Composite (Oct A) M/M 45.8 vs. Exp. 46.5 (Prev. 46.1); lowest since June 2009
German Manufacturing PMI (Oct A) M/M 45.7 vs. Exp. 48.0 (Prev. 47.4)
- German Services PMI (Oct A) M/M 49.3 vs. Exp. 50 (Prev. 49.7)
German IFO Business Climate (Oct) M/M 100.0 vs. Exp 101.6 (Prev. 101.4)
- IFO Current Assessment (Oct) M/M 107.3 vs. Exp 110.0 (Prev. 110.3)
- IFO Expectations (Oct) M/M 93.2 vs. Exp 93.6 (Prev. 93.2)
Bundesbank sells EUR 3.329bln 1.50% Sep'22 Bunds, bid/cover 1.50, Prev. 1.20 (yield 1.560%, Prev 1.520%) - retention 16.8% vs. Prev. 28.0%
- Today's yield is the highest since April, and despite the Bundesbank retaining less than in the previous auction, the size of today's offering was smaller by EUR 1bln.
European equity futures trade in flat to positive territory after suffering losses early in the session after the poor PMI and IFO numbers from Germany added downward pressure stocks, however the market retraced much of the losses, with cash bourses edging into the green at the midway point today. The modest gains are led by strong performance in the technology sector, after Facebook reported a beat on EPS after-market yesterday. Financials remain the laggard today, as the lack of progress with both Spain and Greece keeps sentiment tepid. US stock futures currently trade higher, indicating a green open on Wall Street today.
In individual stocks news, Boeing have reported firm Q3 performance, with cont. ops EPS of USD 1.35 vs. Exp. USD 1.12, raising their 2012 forecast. The good news for the aerospace/defence sector continued, with Lockheed Martin beating EPS estimates for Q3 at USD 2.21 vs. Exp. USD 1.85. European aerospace/defence firms are benefiting from the optimistic reports, with EADS and BAE Systems both registering gains in their share price after the earnings releases.
Less than impressive EU related macro data weighed on EUR, which as a result underperformed its peers during the EU morning session. Also, touted UK bank buying in GBP/USD, as well as deteriorating conditions in EU credit markets which translated into lower EUR/GBP, exaggerated the selling pressure on the EUR. Despite a firmer USD, AUD/USD continues to benefit from firmer CPI report in Australia, which prompted markets to re-price rate cut expectations.
The energy complex trades mixed ahead of the NYMEX pit open, as the higher USD-index keeps a cap on any gains seen from the 3-month high HSBC manufacturing PMI from China overnight. Energy complex price action for the US session will focus on the weekly crude numbers from the DoE after last night's APIs showed a lower-than-previous build in crude stocks. The broader commodities market is lacking direction, as participants await the FOMC rate decision due later in the US session.