Europe
After the price swings seen yesterday, today felt like Groundhog Day for beleaguered investors as an early rebound on the open, soon gave way to further fresh losses as the FTSE 100 came within sight of its 2013 lows at 6,023, as nervous investors offloaded banking and oil shares, on what was a another roller-coaster day for share markets, as markets rallied aggressively off their lows in the afternoon session.
The afternoon session has been an absolute roller-coaster with US data showing an improvement in the US economy while comments from Federal Reserve members sent markets gyrating in all directions with hawkish and dovish statements in equal measure.
What was most interesting was a statement from Fed board member James Bullard that the end of QE should be delayed if necessary, which suggests a deep anxiety at the heart of the US central bank with respect to the slowdown in global growth and perhaps the strength of the US dollar.
European markets once again led the declines with southern European bourses once again getting pummelled, while Italian, Spanish and Greek bond yields blew higher again, as investor’s rotated capital out into US treasuries, UK gilts and German bunds.
In Greece the 10 year bond yield blew past the 8% level as markets grew increasingly twitchy about the political goings on in a country that has historically been a bit of a hair trigger with respect to investor sentiment.
Markets are becoming increasingly concerned that the country’s desire to exit its bailout program early could mean that they are more likely to deviate from the reform program set out by the IMF.
Once again Shire (LONDON:SHP) led the declines after AbbVie Inc (NYSE:ABBV) management confirmed that they were recommending shareholders reject the deal.
Banks also got pummelled on concerns over lower profit margins given that interest rates look likely to stay lower for longer and lending activity was likely to remain subdued. Royal Bank of Scotland Group (LONDON:RBS) led the declines in the London market, with Barclays (LONDON:BARC) not too far behind.
Tullow Oil Plc (LONDON:TLW) and Royal Dutch Shell (LONDON:RDSa) shares were also under pressure as Crude Oil prices once again plumbed fresh multi month lows, as the December US oil contract dropped below $80 a barrel.
On the plus side lower oil prices appear to be outweighing Ebola concerns propelling Int Consolidated Airlines (OTC:ICAGY) to the top of the FTSE 100, with Easyjet (LONDON:EZJ) also higher.
US
US markets once again plunged on the open despite a late rally into the close, as worries persist with respect to the direction markets could well head in next.
Last nights Fed Beige Book was a broadly positive report, but given that US blue chips generate over 50% of their earnings from abroad, questions are being asked as to whether or not current valuations are sustainable. Given that US markets have outperformed global markets quite markedly over the past few years the general view would appear to be that valuations could well be too high.
Weekly jobless claims would appear to reinforce the positive economic narrative in the US coming in at 264k, much better than expected at 290k, while US industrial production for September came in well ahead of expectations rising 1%.
Contradictory comments from FOMC members have added to the uncertainty this afternoon and to the volatility this afternoon.
Apple (NASDAQ:AAPL) shares are expected to be in focus as they get set to launch a new iPad after failing to gain a foothold above $100, they do appear to look vulnerable.
FX
Despite some dovish rhetoric from Fed member James Bullard the US dollar has had a fairly good day with only the pound managing to hold up against it.
The Australian dollar has lost ground sharply as commodity prices have remained weak with Copper sliding sharply.
Petro currencies have also slid with the Norwegian krone and the Canadian dollar coming under pressure as oil prices continue to fall..
Commodities
A four year low for Brent crude oil, and US prices falling below $80 a barrel may be good news for cash strapped consumers, but as a bellwether for energy demand in Europe and across the rest of the world it speaks to wider concerns about the prospects for growth in the global economy through to the end of the year.
It would appear that Saudi Arabia is quite content to keep the supply taps open at current levels to put the squeeze on US producers whose overall cost benefit for pumping shale oil is getting smaller as prices continue to fall.
It is hard to imagine prices staying at these levels for long, but given that OPEC is not due to meet until the end of November they might stay at these levels for some time to come and maybe even push lower.
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