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Dollar at Yearly High as Markets Pare October Losses – EMEA Brief 31 Oct

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  • USD reaches its highest level this year as it breaches the 97.00 level it tested earlier this year, a level it hasn't seen since June 2017
  • Asian markets have shown signs of recovery heading towards the end of October which saw significant losses globally. The Shanghai Composite rose just over 1% despite the manufacturing growth rate missing forecasts
  • The Dow Jones also saw strong gains yesterday following a consumer confidence report which beat expectations, reaching its highest level since 2000. As a result Wall Street is no longer in the negative since the beginning of the year. 
  • US oil inventories to be announced today may see the price fall further. The price is already down over 13% from its peak this year which was at the beginning of this month. Reports suggest the outlook may be bearish as reports suggest stockpiles may be higher than expected and BP have reported their refinery output has increased at the fastest rate for 15 years. 
  • Gold is at its lowest price in over 2 weeks but October is set to be the first month of gains following 6 straight months of losses, the longest streak since 1997.
  • Facebook beat earnings expectations yesterday with an EPS of $1.76 compared to $1.47 expected, providing relief for the company that has had negative press over the past year .
  • Samsung saw a 21% increase in operating profit for Q3 YoY, in line with guidance.
  • Reports of a new Boeing aircraft crash in Indonesia have sparked inquiries into what could cause problems with such a new aircraft. Airlines and their suppliers are likely to be under scrutiny in the coming weeks. 
  • Eurozone YoY CPI is set to be released at 10am and Canadian GDP will be announced at 12:30pm, both could provide volatility with their indices and currency prices. 

Asian overnight: An impressive session overnight saw Asian markets follow their US counterparts higher, despite a raft of somewhat disappointing data points from Japan and China. Weaker industrial production, housing starts, and consumer confidence in Japan saw USDJPY push higher over the session. We also saw the BoJ keep rates unchanged, while trimming their inflation forecasts. Meanwhile, the Yuan fell further amid a disappointing set of PMI surveys, with both manufacturing and non-manufacturing expansion slowing down.

The Australian ASX 200 also saw gains yesterday, led by strong performance in the energy sector specifically. The finance sector also also saw gains of almost 1%. This comes in spite of a 5% reduction in profit from one of the banks (ANZ) that is heavily weighted in this sector which still saw share price increases of 1.05%.

Nickel is down almost 30% from its highest point this year and has returned to the price last seen in December 2017 following the lower than expected Chinese manufacturing data. As with many markets, the commodity will have had sell-side pressure over concerns with the US-China trade war which will have intensified recently with Trump considering further tariffs. The metal has seen increasing demand as it is used in the batteries of electric vehicles which have seen an increase in production. However Tsingshan Holding Group have also announced their intention to implement a more effective supply chain for nickel which will further reduce its price. 

UK, US and Europe: Looking ahead, the European session sees markets focus on the latest eurozone inflation data, with both core and headline CPI expected to rise for October. US ADP non-farm payrolls should shift us into a jobs mindset ahead of Friday’s big release, while Canadian GDP and US crude inventories round off a busy afternoon.

Today marks the 10-year anniversary of Bitcoin, the world’s first and most notorious cryptocurrency. As it reaches its milestone for its first decade, the price is set to fall below last years for the first time this year which will only be the second time since its inception that the coin has been worth less on its birthday. It may not be all doom and gloom for the currency though as further financial integration may occur soon as the SEC are reviewing their decision to allow a Bitcoin based ETF. You can read more on the potential effect of this decision on the current price of bitcoin here.

Economic calendar - key events and forecast (times in BST)

Economic Calendar 31.10.PNG

Source: Daily FX Economic Calendar

  • 10am – eurozone CPI (October, flash)< unemployment rate (September): CPI to rise 2.1% YoY and core CPI to rise 1.2% YoY from 0.9%. Unemployment rate to hold at 8.1%. Markets to watch: EUR crosses
  • 12.15pm – US ADP employment report (October): 195K jobs expected to have been created, from 230K a month earlier. Markets to watch: US indices, USD crosses
  • 1.45pm – US Chicago PMI (October): index to rise to 60.5 from 60.4. Markets to watch: US indices, USD crosses
  • 3.30pm – US EIA crude inventories (w/e 26 October): stockpiles to rise by 2.5 million barrels, from a 6.3 million barrel increase a week earlier. Markets to watch: Brent, WTI

Corporate News, Upgrades and Downgrades

  • Next reported a 2% rise in sales in Q2, and it left guidance unchanged for full-price sales growth of 3% over the full year.  
  • Smurfit Kappa reported a 27% rise in EBITDA for the first nine months of the year, while revenue was up 7%. The firm has also acquired a plant and paper mill in Belgrade for €133 million. 
  • Randgold Resources will pay a record full-year dividend of $2.69 per share, up from the original $2. 
  • Pharmaceutical giant GlaxoSmithKline and Tata, the owners of Jaguar Land Rover are set to release earnings
  • Mike Ashley has bought Evans Cycles which was in administration. The owner of Sports Direct also recently bought House of Fraser which was also in administration. 
  • Santander Q3 profits have increased 36%, making almost €2bn in the 3 months up to September. 

Engie upgraded to hold at HSBC
Inchcape raised to overweight at Barclays
Intertek upgraded to buy at Kepler Cheuvreux
Spire Healthcare upgraded to hold at Berenberg

BNP Paribas downgraded to hold at DZ Bank
Fiat Chrysler downgraded to neutral at Mediobanca SpA
Pets at Home downgraded to sell at Goldman
Intu downgraded to reduce at AlphaValue

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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary

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