Source: IFC Markets
The US macroeconomic data proved to be neutral. Initial Claims index did not outperform 300 thousand for the sixth consecutive week. However, the positive news was balanced by the reduced Markit Manufacturing PMI in October. The quarterly earnings reports of some large American companies released yesterday, including Caterpillar (+5%) and 3M (+4,4%) overshot forecasts, and that caused a positive investor reaction. Nevertheless, the investor activity was not so high.
The trading volume on US exchanges was 13% lower the monthly average. After the regular trading session was closed, a weak Amazon earnings report was released, and the company’s stocks tumbled 9% on the OTC market. Currently, futures on US stock indices are traded downwards. In addition to Amazon report, an important factor for low market activity can be considered the news of some Ebola cases in New York. But in general, the US earnings season is running rather good. About one third of the companies listed in S&P 500 published their quarterly reports, and 69.5% of which exceeded the earnings estimates. Today at 14-00 СЕТ New Home Sales in September is to be published in the US. The forecast is negative. Let us remind you that data on financial events from different countries can be found on our website’s "Economic Calendar". Note that the upward retracement of the US stock market is accompanied by the US dollar index rebound. The economy recovery is held in check by investors. There is a possibility of stocks and currencies growth halt in case of any signs of a prompt monetary policy tightening.
European markets upped yesterday. Besides the positive US data, the good EU economy performance also boosted the markets. Markit’s Manufacturing PMI, Services PMI and Flash Eurozone Composite PMI outperformed official forecasts. The EU Consumer Confidence index in October appeared to be higher than expected. At 8-30 СЕТ the UK Q3 GDP is to be announced today. The tentative forecast is negative. Now European stocks are dipping. Due to Ebola threat, TUI Travel stocks fell 1.4%.
Nikkei continues to climb as the yen weakening provides support for Japanese exporters. Investors expect the BOJ to announce money printing continuation at the meeting next Friday. In theory, it may be even increased slightly. Fujifilm Holdings stocks added 2.5% after the news of "Doctors without Borders" started testing its Ebola cure called Avigan. Komatsu stocks upped 1.5% due to good earnings report of a similar US company, Caterpillar.
As it was assumed in the previous overviews, grain futures went on rising in prices. China increased purchasing on the world market. The sell-off program of its state inventories is likely to come to the end. According to USDA, a week before October 16, the country’s soybean exports were 2.2 million tons, 1.7 million of which was bought by China. Corn exports also exceeded estimates and reached 1.03 million tons. A drought in Brazil also affected the price growth. The weekly increase in soybean prices may be the highest in 14 months. By October 19, the US crop gathered amounted to 53%, which is far below the 5-year average (66%). The delay was caused by rainy weather.
MDA Weather Services did not exclude the possibility of El Niño hurricane development this year. However, it may have a weak capacity. According to Australian Bureau of Meteorology, the probability of El Niño occurrence is now 50/50: more information will be available at the end of the year. In our opinion, this hurricane could boost the prices of almost all agricultural products. U.S. Climate Prediction Center believes there will be some definite information regarding El Niño in 30-60 days. Recall that it appeared last time in 2009-2010, and it was rated as "moderate". The "strong" El Niño occurred in 1997-1998, and to some extent contributed to the "Asian" economic crisis.
