Risk assets remained under pressure throughout the last trading session of August as ongoing unrest in Russia showed no signs of abating before the weekend. The cautious mood gave investors an excuse to sell-off further equity holdings with European stocks coming under pressure throughout the afternoon while benchmark indices on Wall Street opened markedly lower, extending yesterday’s declines.
The euro had a hard time holding onto opening levels today with price swings lower earlier on testing support levels around 1.3160 before swinging on the upside towards tentative resistance at 1.3200. Investors remain hopeful that the ECB will extend stimulus measures after data released today confirmed the view that many had held as inflation reached a five year low. The flash HICP reading fell to 0.3% y/y in August from 0.4% the previous month adding to the weaker economic growth headwinds facing policymakers. With the euro supported somewhat towards the afternoon speculation that the ECB will cut rates further or even embark on QE to purchase bonds helped trim gains in equity indices across the region.
Spot iron ore prices declined to a two year low this week, with the TSI 62% Fe CFR Tianjin benchmark index trading towards $87.3/tonne yesterday. The recent outlook for fundamentals has been particularly bearish as Chinese steel smelters remain unwilling to hold more stock than necessary for current operations, prompting traders and producers to cut offers further in a bid to entice buyers back to the market. Recent concerns regarding a lower than expected manufacturing PMI reading and a weaker property market in China have weighed considerably on spot prices and with the big four miners ramping up shipments to China the fundamental outlook for the remainder of the year remains weak. With the official manufacturing PMI and HSBC’s final manufacturing PMI reading expected on Monday the spot market could gain some upside on any positive surprise.