Ashburton insights: A glass half full
Markets took a firmer tone at the end of last week in anticipation of strong policy action from Europe’s leaders at this week’s EU Summits. The first leg on Sunday ended without any major announcements, although judging from the firmer tone in recent days, markets remain hopeful of a breakthrough on Wednesday. The scope of bank recapitalisations (€108bn is rumoured in the press), a decision on Greek debt and a method of boosting the firepower of the EFSF are the areas of focus where politicians need to deliver.
A steady flow of reasonable US economic data and corporate results have also buoyed sentiment. So far, 135 of the largest 500 US companies have reported Q3 results with 70% of announcements ahead of analyst expectations. US third quarter profits are running at around 15% higher than a year ago.
Asian equities have underperformed lately but rallied sharply this morning, supported by this morning’s positive economic data. The HSBC manufacturing survey for October jumped to 51.1 from 49.9, the highest level since May (above 50 indicates improving conditions). Export orders also picked up (having been a concern in recent months), while factory price pressures eased. Combined with last week’s solid Q3 GDP data, recent newsflow suggests China remains on course for a soft landing. With Chinese inflation also likely to trend down over the remainder of the year, monetary conditions are not likely to be tightened any further.
Market update
|
Total Return* (local currency) |
|||||
|
Equity Indices |
|
-5d |
-3mth |
Year-to-Date |
|
|
MSCI AC World |
0.2 |
-9.8 |
-7.5 |
||
|
S&P 500 |
1.1 |
-7.3 |
0.1 |
||
|
MSCI Europe |
0.3 |
-10.8 |
-10.2 |
||
|
FTSE 100 |
0.4 |
-5.9 |
-3.8 |
||
|
Topix (Japan) |
-0.6 |
-12.7 |
-15.5 |
||
|
MSCI China |
-3.6 |
-22.1 |
-22.5 |
||
|
MSCI India |
-1.7 |
-8.7 |
-18.1 |
||
|
MSCI Emerging Markets |
-0.8 |
-12.0 |
-14.1 |
||
|
Bond Indices |
|
|
|
|
|
|
Citigroup Global Government |
0.0 |
2.7 |
4.1 |
||
|
BarCap Global Corporate |
0.8 |
0.5 |
3.3 |
||
|
Commodities |
|
|
|
|
|
|
SPGS Commodity Basket |
-1.1 |
-9.2 |
-3.1 |
||
|
Currency (vs US$) |
Rate |
|
|
|
|
|
EUR Currency |
1.39 |
1.2 |
-3.3 |
3.8 |
|
|
GBP Currency |
1.60 |
1.4 |
-2.0 |
2.2 |
|
|
JPY Currency |
76.26 |
0.7 |
2.7 |
6.4 |
|
|
*except for currency performance |
|||||
The week ahead
Investors have a heavy week ahead for both macro and corporate news. 300 of the largest US and European companies will report results, among them Caterpillar, Proctor & Gamble and UBS.
On the economic data front, US Q3 GDP growth is released on Thursday (consensus expectation: 2.3% QoQ annualised); Japan and India announce interest rates; European monthly manufacturing and services surveys are released for October; and Bank of England governor Sir Mervyn King testifies to parliament’s Treasury Select Committee on Tuesday to explain the decision to increase QE.
The final leg of the EU Summit on Wednesday will likely be the most important event of the week for markets.
Au revoir Monsieur Trichet
Jean-Claude Trichet bids adieu to the ECB this week to be replaced by Mario Draghi. Jersey-based Francophiles may see plenty of him in retirement, however. Monsieur Trichet apparently likes nowhere better to relax than the port of St. Malo in Brittany: “I love going to Saint-Malo…for me, the Rance estuary is one of the most beautiful places on earth”.
