IFC Markets - Analytics

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Weak data from China and US

On Friday the US Dollar index and stocks were in decline. The U.S. macroeconomic data were weak with September consumer spending increasing by modest 0.1% which is the lowest in 8 months. Meanwhile, this indicator represents two thirds of the U.S. economic activity. In the 3rd quarter the consumer spending increased by 3.2% year over year. This pushed the GDP growth up to 1.5%. The expenses cannot expand without the income growth. In September the US average salary slightly decreased following the 0.4% increase in August. As a result, the income growth was marginal amounting to 0.1%. Market participants are worried that the negative trend of the weak U.S. economic expansion will remain in the 4th quarter. The final University of Michigan consumer confidence index for October was revised down from 92.1 to 90 while it was expected to reach 92.5. Weak statistics may postpone the rate hike by the Fed which has positive influence on the stock market so far. If we examine the S&P 500 historical prices, we will see the index growth of 8.3% in October which is its record growth in 4 years. Of course, the further weak statistics will inevitably push the prices down. On Friday the trade volume on the U.S. exchanges was 4% higher the 20 trading days average amounting to 7.4bn stocks. Today at 16:00 CET the October industrial ISM will be released in the U.S., in our opinion, the tentative outlook is negative.

The European stocks are rising today after the final October industrial PMI in Eurozone was revised up from 52 to 52.3. Moreover, the same indices in Germany and Italy were revised up. The Greek banks have successfully passed the ECB stress tests which contributed to the Athens’ ATG stock index growth and influenced positively the stocks of other European banks. The German Commerzbank reported it will pay dividends for the first time since 2007. Its stocks climbed 4.5% on this news. In October the pan-European FTSEurofirst index showed the record monthly increase in 6 years exceeding 8%. This happened due to the dovish ECB comments. No important macroeconomic statistics is expected today in the Eurozone.



The Nikkei index fell today in line with the China’s Shanghai Composite. In China the manufacturing PMI for October declined for the 3rd straight time. In Japan the smelters stocks were the bottom performers as they depend on the demand from China. The Kobe Steel stocks fell 6,5%, JFE Holdings fell 5,6% and Nippon Steel & Sumitomo Metal fell 5,5%. Remember, that tomorrow the Japanese markets are closed due to the public holiday (Culture Day). On Wednesday the IPO of the Japan Post Holdings will take place which can affect the Nikkei index dynamics.

Several commodities futures fell in price amid the weak Chinese macroeconomic data. Markets are concerned about the possible decline in demand.



The coffee prices increased following the International Coffee Organization report on the contracted global export in 2014/2015 by 3.1% to 110.8mln. 60 kg bags for the first time in 5 years. The Arabica exports have contracted by 1.9% to 68.4mln bags while Robusta exports have contracted by 4.9% to 42.3mln.



Cocoa prices have hit a monthly high amid the weather deterioration and possible drought in Côte d'Ivoire and Ghana.



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