On 02 October, 2017 – Global markets began the fourth quarter on a positive note
Investors are waiting for the beginning of earnings season.
United States
US stocks began the fourth quarter on a positive note Monday with all three major indexes touching record high closes as the latest economic data pointed to underlying strength in the economy. The Dow Jones industrials were up 0.7 percent, the S&P gained 0.4 percent and the Nasdaq was 0.3 percent higher. The US dollar extended its gains after the release of the data. The currency has been rising since Fed Chair Janet Yellen’s recent speech that suggested the chances of an interest rate increase in December remain high.
September ISM manufacturing survey surged to a near 13-1/2-year high. Hurricanes Harvey and Irma disrupted supply chains resulting in factories taking longer to deliver goods and boosting raw material prices. Volatile August construction spending rebounded a monthly 0.5 percent after tumbling a downwardly revised 1.2 percent in July. Investors have also pinned hopes on President Donald Trump’s tax reform plan, which envisages lowering corporate tax to 20 percent.
Shares of casino operators were lower while those of gun makers moved higher after a gunman went on a rampage in Las Vegas, Nevada. A rise in US drilling and higher OPEC output sent oil prices lower and with them, energy stocks. Biotechnology stocks advanced. Endocyte posted a substantial gain after announcing the completion of an exclusive worldwide license of PSMA-617 from ABX GmbH. Networking, chemical and electronic storage stocks also saw significant strength.
Minneapolis Fed President Neel Kashkari on Monday urged Federal Reserve policy makers not to raise interest rates again until inflation hits the central bank’s 2% annual target, disagreeing with Fed Chairwoman Janet Yellen He isn’t a voting member of the Fed’s policy setting committee. Similarly, Dallas Fed President Rob Kaplan said the Fed should be “patient” with monetary policy and that the central bank should wait to see a rise in inflation to justify a rate hike. Kaplan is a voting member of the Fed.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was down US$9.40 to US$1,273.70. Copper futures were down 0.2 percent to US$2.95. WTI spot crude was down US$1.12 to US$50.55. Dated Brent spot crude was down 72 US cents to US$56.07. The US dollar was up against all of its major counterparts including the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index was up 0.3 percent. The yields on both the US Treasury 30 year bond and 10 year note were up 1 basis point to 2.87 and 2.34 percent respectively.
European markets
European stock indices (with the exception of the IBEX) began the new quarter on an upbeat note and continued their positive closures to eight straight sessions. Investors were encouraged by Chinese data that indicated the country’s manufacturing sector grew at the fastest pace since 2012 in September. The weakening of the euro against the US dollar also provided a boost. The currency dipped after Catalans voted in favor of independence in a contested referendum. In the weekend referendum, the Catalonian’s voted to leave Spain. The FTSE and SMI added 0.9 percent, the CAC was up 0.4 percent and the DAX was 0.6 percent higher. The IBEX lost 1.2 percent.
According to European Central Bank Executive Board member and chief economist Peter Praet, the euro area’s economic recovery has been solid, broad-based and resilient, yet inflationary pressures remain subdued. “While we remain confident that inflation developments will eventually return to levels below, but close to, 2 percent our medium-term objective, the evidence still shows insufficient progress towards a sustained adjustment in the path of inflation towards those levels.”
Airline stocks rallied on the news that Monarch Airlines has been placed into administration. Lufthansa climbed in Frankfurt while easyJet and Ryanair Holdings rallied in London. BIC tumbled after cutting its 2017 sales forecast. CRH retreated on a Bloomberg report that it is nearing an agreement to acquire Florida-based cement company Suwannee American Cement LLC from Votorantim Cimentos and Anderson Columbia. Daily Mail and General Trust declined — the newspaper publisher expects its full-year pretax profit to be at the lower end of market expectations. Barratt Developments advanced on expectations that the government will extend the ‘Help to Buy’ scheme to stimulate the demand side of the housing market. Roche, Novartis and Nestlé advanced in Zurich.
The euro area August unemployment rate remained stable at 9.1 percent unchanged from July. This was the lowest rate since February 2009. The euro area manufacturing sector grew the most in over six-and-a-half years in September. The final manufacturing PMI climbed to a 79-month high of 58.1 from 57.4 in August. The UK manufacturing sector continued to expand in September, albeit at a slower pace. The manufacturing PMI slid to a reading of 55.9 in September from a 4-month high of 56.7 in August.
Asia Pacific
Asian stocks closed mostly higher in light holiday trading. Markets in China, South Korea, India and Hong Kong were closed for holidays. China’s official September manufacturing PMI index grew at the fastest pace since 2012, helping ease growth worries ahead of an upcoming political meeting beginning October 18.
The Nikkei was up 0.2 percent while the Topix slipped 0.1 percent as the yen weakened against the US dollar and third quarter Tankan survey results that showed business confidence among large manufacturers improved to the highest in a decade. Also, the September manufacturing PMI reading improved to 52.9 from 52.2 in August. Mitsubishi Motors, Fanuc and Yokohama Rubber climbed. However, Nissan Motor declined for the fourth straight session after the automaker temporarily suspended registrations of around 60,000 new vehicles.
The S&P/ASX and All Ordinaries both added 0.8 percent thanks to the positive data from China. BHP Billiton, Rio Tinto and Fortescue Metals Group along with South32 were higher. Beach Energy soared as shares resumed trading after a deal to buy Origin Energy’s upstream oil and gas business. Origin Energy retreated while Oil Search, Woodside Petroleum and Santos climbed. Banks ANZ, Commonwealth and Westpac all advanced.
Singapore’s Straits Times and Taiex rallied 1.3 percent each.
Looking Forward
Reserve Bank of Australia announces its monetary policy decision. India reports September manufacturing PMI. The UK posts September construction PMI. The Eurozone releases August producer price index.
Global Stock Markets
*Note — all releases are listed in local time.
Source: Fidelity
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