15 October 2014

Posted by Graham Parlane on 15 October 2014

Good morning

Ahead 

# Westpac Australian Consumer Sentiment

# ECB President Draghi speaks

# UK Unemployment Rate

# U.S. Retail Sales

# U.S Producer Prices

# U.S. Empire State manufacturing Index

# NZ GDT Auction

Overnight

# European stocks fell in excess of 1% in early trade as another set of horrid German data hit the wires. However by session end equity markets had mostly pared the losses. The EuroStoxx600 ended the eventful session, recovering from -1.4% down to end only marginally lower, down just 0.1%. Stateside action was the exact reverse with U.S. stocks solidly in positive territory for a large part of the session before late losses saw a mixed finish from the various bourses. Energy companies were the biggest drag on the markets sending the Dow to its 4th consecutive loss, down 0.04%. Other bourses fared better, the big board S&P up 0.16%, the tech heavy Nasdaq up 0.31% whilst the small cap Russell 200 which had led the market to the downside in recent months rose a solid 1.13%.

# Crude oil prices fell the most in over 2 years, hit by a confluence of slowing global growth sentiment and signs from the oil producing cartel OPEC that it is not yet overly concerned about recent price moves.  Further, the IEA cut its forecast for oil demand amidst increased output from the U.S. shale revolution. Brent crude oil collapsed 4.9% overnight to $84.7. This takes the overall decline since late June to an eye-watering 27.0%.

# The commodity currency complex of AUD, NZD and CAD can’t buy a trick with their respective mainstay’ of Iron Ore, Dairy and Crude simply hammered this year with the price declines accelerating in recent months.

# The likelihood that Germany is moving ever closer to recession was increased as the German ZEW business sentiment survey came in as a complete shocker. The survey reading fell to a 22 month low to -3.6 from Septembers 6.9. The Current Conditions Index deteriorated to 3.2 this month from 25.4 in August, worse than expectations for a decline to 18.0. Given German GDP shrank 0.6% in Q2 and a recession is defined as 2 consecutive quarters of negative growth it seems unlikely to us that they can avoid it. ZEW President Clemens Fuest said he couldn’t rule out an economic contraction in the third quarter. “We are getting close,” Mr. Fuest said.

# Topping off the common currency zone’s gloom, euro-zone Industrial Production contracted by 1.9% m/m in August (1.6% expected). July’s reading was also revised lower.

# Once again more deflationary pulses were seen in the release of the UK September inflation data. Headline CPI fell from +1.5% y/y to +1.2% the lowest in 5 years. This will only accelerate the winding back of market expectations for Bank of England rate hikes. NZ could have a similarly low read next week. GBP/USD fell in response to a fresh 12 month low of 1.5900.

G.

Tags: Equities, EuroStoxx, S&P, Trader, Broker, FX, Foreign Exchange, Futures, Futures trading, Currencies, Commodities, CFDs, CFD trading, Europe, China, Dow, Citigroup, Australia, Iron ore, Metals, AUDUSD, AUD, USD, US, Home sales, ECB, 10 year bond yield, Germay, UK, Bloomberg Commodity Index