Market update: Speculation mounts over ECB rate cut – 04.11.2013

Source: Henderson Global Investors

US equities rose on Friday, marking their fourth consecutive week of gains (S&P 500 +0.3%; Dow Jones +0.5%), helped by some strong macroeconomic releases. The Institute for Supply Management (ISM) manufacturing survey revealed that US factory activity had climbed to 56.4 (>50 indicates expansion) in October, its best reading for two and a half years. Sentiment was also lifted by data earlier in the day that showed China’s official manufacturing purchasing managers’ index (PMI) was at its highest level in 18 months.

News from Asia overnight was mixed, however. While China’s official services PMI rose from 55.4 in September to 56.3 in October, reaching a 14-month high, fears about the property markets resurfaced. The Hang Seng Index fell (-0.3%) after reports that Shenzhen, a southern Chinese city near Hong Kong, was planning to raise minimum down-payments on second home purchases to help stem rising prices. Elsewhere, Japan, Singapore and India are closed for public holidays.

European stocks are moving higher at the time of writing (FTSE Eurofirst 300 +0.5%; FTSE 100 +0.5%). Speculation is building that the European Central Bank could announce a change in interest rate policy at its meeting on Thursday, following much weaker-than-expected inflation data last week. Bank of America Corp, Royal Bank of Scotland Group and UBS are all forecasting that the central bank will cut its main policy rate. The euro has reached a six-week low against the dollar.