Thin rangy trade is the best way to characterise last nights price action as the last day of October was not the positive day that many hoped it would be. Data and earnings reinforced once again to markets what a weak economic outlook the globe currently faces.
So the early stock and euro strength that Asia handed European traders was soon washed away and negative thoughts and price action emerged once again.
European data showed that the unemployment rate hit an all time record of 11.6% from 11.5% in August. Continuing the theme of a youth lost and a future in peril, youth unemployment in the eurozone is sitting at 23.3% with Spanish youth unemployment a staggering 54.2%. There are now 18.5 million Europeans unemployed and more cuts are coming from corporate Europe.
The boss of Fiat summed up the outlook pretty succinctly to me with Bloomberg reporting:
“Events of the past 12 months have reinforced our negative view of the development of the European markets,” Fiat Chief Executive Officer Sergio Marchionne said. “We see continuing weak trading conditions for the remainder of 2012, extending well into 2013 and at least part of 2014.”
In the US eyes were on the Chicago PMI which although it rose to 49.9 from 49.7 was still in contraction territory and well below the punditry’s estimate of a rise to 51. Interesting for me in the internals was the weakness in the Employment index which, at 50.3, is the lowest level since December 2009. Production also fell shaprly from 55.4 to 51.8 – ouch.
US markets have hardly moved and stocks on the NYSE have only just come back into the black in the last hour of trade after Europe handed them a poor start with stocks once again buffetted by weak earnings. The S&P has been in negative territory for most of the day and only move up in the last hour and is just
Stocks in Europe were hit by the unemployment data but also by the earnings report by ArcelorMittal, which is the worlds biggest steelmaker, that it had lost $709 million in Q3 and was slashing its dividend. So at the close of play the FTSE was down 1.15%, the DAX dropped only 0.33% after German retail sales surprised to the topside while in France the the CAC was 0.87% lower. The FTSE suffered a little under the weight of the news that even though last week’s Q3 GDP showed that britain had exited recession Consumer Sentiment released overnight was at a 6 month low of -30 from -28 in September with the 12 month outlook also falling 2 points.
Lets have a look at some Met4 charts from my AVATrade platform.
EUR/USD: The euro made a high of 1.3021 before pulling back under the weight of the equity reversal and the resultant US dollar strength. Euro is currently on the lows since its high at around 1.2944. I’d just characterise this as range trade in the run up to some very important Asian PMI’s today and then non-farm payrolls on Friday night.
AUD/USD: Try as it might to get up through 1.04 it just cant breach the wall of sellers that are lined up there at the moment. The high of 1.0399 overnight was just under and if you look at the 15 minute charts you can see the AUD sat just below there for the best part of European trade – perhaps it was a London fix set ramp for month end – I have no way of knowing but it dropped down to the 1.0350 region and sits now at 1.0373.
Data: PMI’s in Asia and in Australia we have the import and export price indices and the RBA Commodity price index. Tonight we see the release of Markit Manufacturing PMI in the UK, its all Saints day in a lot of Europe and then we get ISM in the US as well as the Markit PMI and ADP employment survey as well as jobless claims.
Here is how the markets looked this morning.
Twitter: Greg McKenna . He is the Chief Investment Officer of Macro Investor, Australia’s independent investment newsletter covering trades, stocks, property and yield. Click for a free 21 day trial.
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