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Europe stocks record gains for October

 

Tuesday, November 01, 2022, 8.45am GMT

The news shaping the markets today

The UK warned Russia’s President Vladimir Putin of severe consequences of using nuclear weapons in Ukraine. Despite the ongoing tensions, the safe-haven US dollar index traded slightly lower.


The Reserve Bank of Australia raised its cash rate by 25bps to 2.85%, taking borrowing costs to the highest level since April 2013, lending more support to the AUD/USD forex pair.


China’s Caixin general manufacturing PMI climbed to 49.2 in October, from September’s four-month low of 48.1. However, manufacturing activity remaining in the contraction zone sent the CNY/USD pair lower in forex trading this morning.


Japan’s manufacturing PMI came in at 50.7 in October, in-line with the flash estimate. The news provided support to the JPY/USD forex pair.


South Korea recorded a trade deficit of $6.70 billion in October, versus a year-ago surplus of $1.82 billion. Despite this, the KRW/USD pair rose in forex trading this morning.

 

What’s happening: European stocks settled higher on Monday, with gains for the month of October.

What happened: Equity markets in Europe notched their first monthly rise in three months, driven by the strong earnings season.

Investors also assessed the most important economic data released on Monday.

Why it matters: Markets in Europe closed higher On Monday, recovering losses earlier in the session on data showing record high inflation in the Eurozone and weak factory activity in China.

Inflation in the Eurozone accelerated to 10.7% in October, from 9.9% in the previous month, according to Eurostat data. The latest reading also exceeded market expectations of 10.2% and came in much higher than the ECB’s target of 2%. Another report showed the Eurozone economy expanding by 0.2% in the three months to September 2022, representing a slowdown from the second quarter’s 0.7% growth.

China’s manufacturing activity surprisingly contracted in October, with the official PMI falling to 49.2 for October, from September’s reading of 50.1.

The ECB had recently raised its deposit rate to 1.5% and called for further tightening in the forthcoming months. Investors waited on the sidelines ahead of the Bank of England’s upcoming policy decision later this week. Across the pond, the Federal Reserve is widely expected to hike its benchmark lending rate by 75 bps this week. However, market experts believe the US central bank could announce a smaller rate hike of 50 bps in December.

The pan-European STOXX 600 index gained 0.35% to settle at a more than six-week high of 412.20 on Monday, with travel and leisure stocks leading the gains.

The German DAX 40 rose 0.08% to settle at 13,253.74, after data showed retail sales in the country growing by 0.9% in September, after a 1.4% decline in August. London’s FTSE 100 rose 0.66%, while France’s CAC 40 lost 0.1% on Monday.

For October, the STOXX 600 added more than 6%, while the DAX 40 climbed around 10%, notching its strongest monthly performance since November 2020.

What to watch: Investors await the release of manufacturing and services PMI data, scheduled for release later this week. Interest rate announcements by the major central banks around the world will also remain in focus.

The markets today

The Canadian dollar will be in focus today ahead of the country’s manufacturing PMI

Context: The CAD/USD forex pair declined on Monday, mainly due to strength in the greenback, which recorded gains across the board.

Details: Markets are expecting the US Federal Reserve to raise its benchmark interest rates by another 75 bps at its meeting on Wednesday, which provided support to the dollar on Monday.

After recording losses last week, the greenback also received a boost from rising US treasury yields ahead of the Fed’s rate decision. A rate hike by another 75 bps would take the country’s policy rate to a range of 3.75% to 4.00%.

Last Wednesday, the Bank of Canada had increased its benchmark rate by half a percentage point.

The US dollar index, which measures the greenback’s performance versus a basket of major rivals, gained 0.7% to 111.53 on Monday. The gains in the greenback were capped, however, by economic data showing signs of a slowdown in the economy. The Chicago Purchasing Managers’ Index fell for a second month in a row, while the Dallas Fed manufacturing index also moved lower in October.

The decline in prices for crude oil, one of Canada’s major exports, also exerted pressure on the loonie on Monday. US WTI crude oil futures fell 1.6% to close at $86.53 per barrel, following downbeat factory activity data from China.

The CAD/USD forex pair lost around 0.1% to settle at 1.3626 on Monday, but still recorded gains for the month of October.

What to watch: Traders await the release of economic data on manufacturing PMI from Canada today. The S&P Global Canada manufacturing PMI, which rose to 49.8 in September, is expected to decline to a reading of 49 in October. The release of several economic reports from the US will also remain in focus today.

Other Markets: US indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.39%, 0.75% and 1.22%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY  – 148.11 and 148.27 Positive
GBP/USD – 1.1506 and 1.1518 Positive
Gold – 1640.95 and 1642.75 Positive
Copper  – 3.4224 and 3.4357 Positive
FTSE 100 – 7092.87 and 7119.64 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (0.9897, 0.14%) Dow ($32,876, 0.31%) Brent ($93.58, 0.8%)
GBP/USD (1.1498, 0.30%) S&P500 ($3,897, 0.35%) WTI ($87.07, 0.6%)
USD/JPY (148.34, -0.27%) Nasdaq ($11,488, 0.36%) Gold ($1,640, -0.1%)

What else to watch today

Russia’s manufacturing PMI, Germany’s import prices, Turkey’s manufacturing PMI, UK’s Nationwide house price index and manufacturing PMI, South Africa’s manufacturing PMI and total vehicle sales, Brazil’s industrial production, manufacturing PMI, balance of trade and Central Bank of Brazil’s Copom meeting minutes, Mexico’s manufacturing confidence index and manufacturing PMI, US Redbook index, S&P Global manufacturing PMI, ISM manufacturing PMI, job openings, construction spending, Dallas Fed services index, Logistics Manager’s Index and API crude oil stocks, Russia’s money supply M2, as well as India’s balance of trade.

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