On 02 November, 2015 – European markets advanced on better than expected eurozone manufacturing report

Stocks were mixed globally — shares mostly retreated in Asia but advanced in Europe and the US on a mix of earnings news and in Europe, on positive economic data.

United States

Stocks advanced to begin the week. Economic data were generally disappointing but stocks advanced on merger and earnings news. Another step in the recovery from this summer’s meltdown occurred Monday as an advance in US stocks pushed the Nasdaq above its July high and toward record territory. The Dow Jones industrials were up 0.9%, the S&P added 1.2% and the Nasdaq jumped 1.45%.

Health care stocks were among the winners. Pfizer shares rebounded after slumping late last week on word that Pfizer was in talks to buy competitor Allergan. Shares of AbbVie, which surged Friday on strong third quarter results, climbed after a broker upgrade. Hewlett-Packard officially split into two companies over the weekend: HP Inc., which will sell personal computers and printers, increased while Hewlett Packard Enterprises, which will sell commercial computer systems, software and tech services, slipped. Visa said it will buy its sister company Visa Europe in a deal that could be worth more than US$23 billion. Visa Europe has been a separate company since 2007. Visa shares slipped. Chipotle stumbled as an E. coli outbreak linked to restaurants in Oregon and Washington State spread. The Mexican restaurant chain has shut down all 43 of its restaurants in those states. Officials said Friday that more than 20 people had gotten sick and that number is expected to increase as word of the outbreak spread.

The manufacturing sector remained stuck in neutral in October as factories struggled with dwindling overseas demand and well-stocked customers at home. The ISM manufacturing index slipped to a reading of 50.1 from 50.2 in September, just above the breakeven point between growth and contraction. September construction spending continued with its solid gains, this time up 0.6% on the month and 14.1% from a year ago.

Gold at the afternoon London fixing was down US$8.35 to US$1,134.00. Copper futures were down 0.2% to US$2.31. WTI spot crude was down 48 US cents to US$46.11. Dated Brent spot crude was down 77 US cents to US$48.79. The US dollar was up against the yen and the Canadian dollar. It was virtually unchanged against the pound. However, it declined against the euro, Swiss franc and the Australian dollar. The Dollar Index was up 0.2%. The yield on both the US Treasury 30 year bond was up 3 basis points to 2.95% and 10 year note was up 4 basis points to 2.18%.

Europe

Stocks advanced Monday after getting off to a weak start thanks to the disappointing Chinese manufacturing PMI. However, the markets reversed direction after the better than expected Eurozone manufacturing report. The FTSE was virtually unchanged (up 0.71 point) as was the SMI (down 2.57 points). However, the CAC and DAX added 0.4% and 0.9% respectively.

Commerzbank climbed after reporting third quarter results. Commerzbank also announced that its Chairman of the Board of Managing Directors and Chief Executive Office, Martin Blessing, has informed the company that he would fulfill his contract running until the end of October 2016, but would not accept the offer to extend his term. Deutsche Bank also advanced. Both RWE and E.ON gained. Automakers Volkswagen, Daimler, BMW, Renault and Peugeot were up on the day. Banks Crédit Agricole and Société Générale gained.

In London, HSBC, which reported third quarter results, declined. Shire was down after it agreed to acquire Dyax for US$5.9 billion. Hikma Pharmaceuticals retreated after it reduced its forecast for its generics business. EasyJet declined on a broker downgrade. Ryanair gained after the airline reported significant growth in its first half profit. Electrolux dropped in Stockholm after the US Department of Justice rejected the company's proposal to acquire the appliance business from General Electric.

Eurozone manufacturing PMI climbed to 52.3 in October from 52 in September. Germany’s manufacturing PMI slipped to 52.1 from 52.3 in September. In France, the index was unchanged at 50.6. However, British manufacturing activity expanded at the fastest pace in 16 months in October as output and new order growth accelerated. The PMI jumped to 55.5 in October from 51.8 in September.

Asia Pacific

Stocks here were mostly lower after Chinese data underscored persisting weakness in the economy. A weak lead from Wall Street on Friday after mixed earnings and disappointing data on consumer sentiment, personal income and spending also dented investor sentiment.

The Shanghai Composite declined 1.7% while the Hang Seng was down 1.2%. Over the weekend, both the CFLP and Caixin manufacturing PMI indicated contraction.

The Nikkei sank 2.1% as stimulus hopes faded and a stronger yen on the back of weak US and Chinese data weighed on exporters' shares. Among top exporters, Nissan Motor, Honda Motor and Panasonic were down. Sharp declined after posting a net loss for the first half of fiscal 2015. Kobe Steel dropped after slashing sales and profit forecasts. JFE Holdings and Nippon Steel & Sumitomo Metal also declined.

The S&P/ASX declined 1.4% while the All Ordinaries lost 1.3%. The indices were dragged down by banks after Westpac's chief warned of headwinds on profit growth. Mixed building approvals, inflation and manufacturing data also weighed on investor sentiment ahead of Tuesday's Reserve Bank of Australia’s monetary policy decision. The four big banks retreated while miners were mixed.

The Kospi added 0.3% as investors picked up bargains after recent losses. The Sensex was down 0.4%, extending declines for the sixth straight session. The country's manufacturing PMI slipped to 50.7 from 51.2 in September.

Looking forward

Monday — Final October manufacturing PMIs will be released for China, Japan, India, Switzerland, Eurozone, France, Germany, Spain, the UK and US. In the US, the ISM manufacturing index also will be released along with September construction spending.

Tuesday — The Reserve Bank of Australia announces its monetary policy decision. The US releases September factory orders.

Wednesday — Australia posts September merchandise trade balance and retail sales. October services PMIs will be released for India, Japan, the UK and US. Composite PMIs will be posted for the Eurozone, Germany and France. The Eurozone posts September producer price index. The US and Canada release September international trade data. The US also posts October ADP private employment report and the ISM nonmanufacturing report.

Thursday — Germany releases September manufacturing orders. Eurozone posts September retail sales. The Bank of England announces its monetary policy decision, releases the minutes from the meeting and publishes its Quarterly Inflation Report. The US reports its quarterly productivity & costs data along with the weekly jobless claims, money supply and Fed balance sheet data.

Friday — Germany and the UK post September industrial production while France reports September merchandise trade. In the US, the October employment situation report will be released. Canada’s labour force survey for October also will be reported.

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.