European Commission's announcement weighs on market sentiment

Tuesday, November 04, 2014

European equity markets extended losses in today’s trading session after the European Commission lowered its economic outlook for Eurozone in 2015, suggesting it would grow modestly by 1.1% next year compared to a 1.7% rise from a previous estimate. The European Commission also slashed inflation projections for 2015 from 1.2% down to 0.8%, while Germany’s GDP was cut from 2% to 1.1% in 2015 and France’s GDP was reduced to 0.7% from 1.5% in the previous forecast in May. 

The DAX, CAC, IBEX and FTSE MIB retreated sharply between 1.04% and 2.3%, while the London equity benchmark managed to hold around 6,450, down 0.6% on the day. However, the euro reversed recent losses and rebounded above 1.275 against the US dollar, showing signs of correction higher.

DAX Index

DAX Index (Deutsche Boerse AG Ge 2014-11-04 17-10-02 

In the US, The Dow Jones, NASDAQ and S&P 500 indices came under renewed pressure following tepid US macroeconomic data and the general negative market sentiment across equity and commodity markets. ISM NY manufacturing was reported at 54.8 in October, missing analysts’ expectations of 62.0, while factory orders declined 0.6% in September, as expected.

Crude oil prices continued their sharp downside momentum as both the WTI and Brent front month futures plunged more than 2.5% following an announcement from Saudi Arabia which caused further uncertainty in the oil market. WTI front month futures retreated more than $4 in 2 trading sessions, heading towards $75 per barrel.

WTI Front Month futures are heading towards $75/barrel

CLZ4 Comdty (WTI CRUDE FUTURE  D 2014-11-04 17-08-24

Base metal prices were also in the red amid renewed concerns about a slowdown of the global metals demand from the US, Asia and Eurozone and sluggish economic conditions. Aluminium and copper slid lower over 1%, while Nickel reported fresh losses to retest 15,300, down 12.8% at the time of writing. Gold managed to hold in the positive territory, after gaining 0.3% towards $1170.   

Tomorrow, market participants will be keeping an eye on the Markit services PMI data from the US, Eurozone, UK and Germany as well as US ADP employment figures which could give an insight regarding US employment conditions ahead of the non-farm payroll data on Friday. 

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