A strong rally for global equity markets

Monday, October 05, 2015

Asian equity markets rallied overnight with the Nikkei index gaining over 1.5% and adding over 280 points to breach above the 18,000 area. The Hang Seng index climbed 1.4% (300 points) towards 21,800, supported by strong gains in information technology and consumer discretionary sectors. Glencore rallied in Hong Kong and hit a high at 18.36 but gave back earlier gains to finish the session at 12.40. In London, this morning Glencore’s shares rallied 19% following Hong Kong’s record rise.

The World Bank has lowered growth forecasts for countries in the Pacific and East Asian regions today. More specifically, the estimate for China’s GDP for 2015 was cut from 7.1% to 6.9%.

European equity markets opened in positive territory and climbed higher in early trade. The DAX, CAC, IBEX and London equity benchmark indices gained between 1.05% and 1.5% in early trade, while investors await key Markit Services PMI indicators and the Eurozone’s retail sales. The euro hovered around 1.1250 against the USD in early trade, struggling for direction.

The USD index remained under pressure and extended losses for a third consecutive session, offering some support to commodity prices. US non-farm payrolls data was fairly disappointing on Friday, verifying ongoing concerns regarding the US employment conditions. Factory orders also declined by 1.7% m/m in August, missing expectations of a 1.2% drop, while ISM NY manufacturing was reported at 44.5 in September compared to 51.1 in August. The poor US economic indicators weighed heavily on market sentiment and added further pressure to the USD on Friday.

Crude oil prices edged higher in early trade this morning as WTI front month futures climbed towards $46 per barrel. In the meantime, Saudi Arabia has made big reductions to the prices it charges for its crude oil, however, the news had little or no effect on the prices. Base metal prices climbed higher while gold remained in negative territory after hovering around $1130/ounce.   

Market participants will be keeping an eye on the release of the US Markit Services PMI as well as ISM Non-Manufacturing PMI data, which will set the tone of today’s trading session. This week, the main focus will turn to major central banks, while we expect no policy changes from the Bank of England, Bank of Japan or the Reserve Bank of Australia. The Bank of Japan is scheduled to hold a policy meeting on October 6-7.

USD index remains under pressure

DXY Curncy (DOLLAR INDEX SPOT)   2015-10-05 09-13-49

 

EUR hovers around 1.1250

EURUSD Curncy (EUR-USD X-RATE)   2015-10-05 09-15-01

Events for today:

0855

DE

Sep

Markit Services PMI

0900

EZ

Sep

Markit Services PMI

0930

UK

Sep

Markit/CIPS Services

1000

EZ

Aug

Retail Sales

1445

US

Sep

Markit Services PMI

1500

US

Sep

ISM Non-Manufacturing

 

All times UK Local Time

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