FTSE rallies with commodities
German DAX slumps on surprise manufacturing drop
Glencore (LONDON:GLEN) shares round-trip
US markets open higher
Oil prices rally on higher demand
UK & Europe
It was a bit of shaky first day of the quarter with early gains across Europe giving way after a string of underwhelming manufacturing data which served to reinforce IMF Chief Christine Lagarde’s latest warning of slower global growth this year.
The UK’s FTSE 100 stood tall thanks to another strong day for commodities. If commodities were in the midst of building a base following the recent rout, that might just be enough to allay growth fears and help stock markets recover.
Markets on the continent had seen early gains off the back of more stable Chinese data but stocks in Germany and Italy rolled over after missing manufacturing data estimates.
China’s manufacturing remains in contraction territory according to purchasing managers but markets were able to react positively following the data-release since the sector has not worsened since previous readings. China’s official manufacturing PMI for September improved to 49.8 while the final reading from Caixin was 47.2.
The final manufacturing PMI for the Eurozone in September remained at 52.0, remaining in expansion territory but showing signs of stalling. Improvement in French manufacturing was offset by a surprise decline in Germany and a bigger than expected miss from Italy. Manufacturing in the UK declined less than expected.
Glencore shares managed an impressive round-trip after prices rose when the company announced it would cut more South African jobs as it closes mines in the country but dropped again once the price had recovered Monday’s massive 29% plunge.
Supermarkets give back some of Wednesday’s impressive gains when Sainsbury’s surprised by raising its annual profit forecast.
Data estimating a rise in global oil demand from the Joint Oil Data Initiative helped oil prices as well as shares of BP (LONDON:BP) and Royal Dutch Shell (LONDON:RDSa) see some big gains on the day. The JODIs research is a bit of a counter-factual to the idea that China’s slowdown means less demand for oil.
Pearson (LONDON:PSON) was a top riser after a broker reinstated coverage of the stock with a ‘buy’ recommendation. Shares of Johnson Matthey (LONDON:JMAT) rose on the completion of an asset sale for £256m.
US
Worse than expected manufacturing data set off concerns about the strength of the economy and sent the major US indices lower in early trading, with Apple shares (NASDAQ:AAPL) down by nearly 2%.
The US ISM manufacturing report declined to 50.2 in September from a previous reading of 51.1, just avoiding contraction. It’s the weakest print for ISM manufacturing since May 2013 and marks the third miss in succession. The report follows weakness across the six major regional Fed surveys and leaves little doubt that US manufacturing has hit a serious road block.
Jobless claims rose more than expected in the past week but remained close to multi-decade lows.
Twitter (NYSE:TWTR) shares got dumped by as much as 5% after rumours Jack Dorsey is set to be confirmed as permanent chief of the troubled social network.
FX
The dollar was mostly lower on Thursday after disappointing economic reports cast doubt over the Fed’s ability to hike rates this year. Early on it had broadly gained against European currencies but lost out to the commodity currencies. There is considerable uncertainty over the timing of a Fed rate hike with ISM manufacturing data dropping the lowest in over two years leading into Friday’s jobs report.
The Swiss franc was a top faller after Swiss retail sales surprisingly turned negative in September while its manufacturing PMI dropped into contraction territory at 49.5.
The euro dipped against the pound after a fakeout above 0.74 in EUR/GBP, the top of its tight recent range after German manufacturing data missed expectations.
The Aussie dollar was one of the top risers, supported by a rally in commodities and a rise in Australian job vacancies.
Commodities
Stabilisation in Chinese manufacturing data and the slowdown in US oil production reported by the DOE alongside a research report suggesting higher global demand than the same period last year have helped crude oil extend its recent turn higher.
Weakness in the US dollar following disappointing economic data reversed early losses in gold, setting it up for its first up-day in five.
Copper prices stabilised after Wednesday’s huge run-up. Copper was a buy the rumour, sell the fact trade on China’s slightly more stable footing in manufacturing.
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