Europe
After initially plunging alongside the price of oil, shares in Europe pulled off the lows on Tuesday after service sector data improved in core Eurozone counties France and Germany while China went some way to redress global growth fears by fast-tracking a $1tn infrastructure program.
UK markets trod a similar path to those in the mainland but were held back by a large unexpected miss in UK service sector data when a small gain was expected.
The UK service sector PMI saw a severe dip to 55.8 a far cry from the 58.9 forecasted. The results for December in manufacturing, construction and now services have all been below par and point to a slowdown in economic growth in the UK for the fourth quarter. The surveys all show the UK well into expansion territory but the sharp fall-off in December is provoking concern over the ability of the economy to withstand a rate-hike any time soon.
The Bank of England also released its credit conditions survey. Figures showed the largest jump in credit card demand in the pre-Christmas period since records began alongside an unexpected drop in mortgage demand.
The worry is that economic growth slows to a level that consumers weren’t banking on when they went the extra mile on their Christmas pressies using credit.
Miners were topping UK indices with Randgold Resources (LONDON:RRS), Fresnillo Plc (LONDON:FRES), Anglo American (LONDON:AAL) and Rio Tinto (LONDON:RIO) all seeing strong gains off the back of increased in commodity demand from the Chinese government infrastructure program.
Shares in oil companies pulled away from their lows alongside miners on the prospect of a boost to global demand from the Chinese stimulus.
The warning from John Lewis (LONDON:JLH) that Black Friday sales meant increased revenues but threatened profits was a drag on other retailers including Tesco’s and Dixons Carphone.
Ashtead Group (LONDON:AHT) fell the most in 16 months following other large drops in US construction stocks including United Rentals Inc (NYSE:URI) and Caterpillar Inc (NYSE:CAT).
US
Markets in the US were overdue a pullback since the kind of political concerns emanating out of Athens and Westminster don’t directly affect them and they got it today with a higher open.
Gains in US stocks were soon under threat from the release of disappointing services data from ISM and Markit that demonstrated the US is not immune to the global fourth quarter economic slowdown.
Shares in AOL Inc (NYSE:AOL) opened higher on Tuesday on the prospect of a tie-up with Verizon Communications Inc (LONDON:VZC) which could lead to an acquisition. Verizon are looking to expand online content including mobile video services.
Facebook Inc (NASDAQ:FB) has bought a voice recognition start up ‘Wit.ai’ to add to its collection of acquisitions including the $19bn purchase of WhatsApp. Zuck and his team are looking to turn user’s actual speech into another source of data to be harvested and turned into more targeted ads to increase the likelihood of a click and revenue for Facebook.
FX
The US dollar was mixed on Tuesday after a strong multi-day run. Commodity currencies including the New Zealand dollar and Australian dollar caught some demand thanks to Chinese stimulus efforts. The Japanese yen gained alongside US treasuries benefitting from safe-haven flows.
USD/JPY, EUR/JPY and GBP/JPY were all lower as the recent pullback in equity markets saw investors seek safe-havens in gold, silver and Japanese yen.
Since there doesn’t appear to be more easing programs in Japan for the time being the weakening of the yen has paused. If dollar-yen holds at around 120 it reduces the risks to buying yen during risk-off periods.
Swiss francs have not seen safe-haven flows since the SNB went to negative rates.
Commodities
Crude Oil prices lurched lower in early European trading but made back around half of the losses by the open of the US session leaving WTI still down close to 2% and well below $50 per barrel. The let up in oil price declines is largely technical as profits are taken close to the key $50 psychological level.
Gold and silver had another day of modest safe-haven demand holding onto $1,200 and $16 per oz respectively, also boosted by prospects of increased China stimulus.
The reaction from copper to Chinese stimulus was lukewarm as it hovered around slightly positive territory.
CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person