03.10.14 Friday Morning

Better-than-expected US Non-Farm Payrolls figures gave markets an upbeat end to the week after negativity surrounding the political unrest in Hong Kong and clashes between pro-democracy protestors and pro-government supporters.

The riots and violence caused the closure of many retailers in Hong Kong and extended throughout the week leaving the Hang Seng reeling down to 2294 this morning, looking to bounce back on a torrid week.

The dollar had a strong week making huge gains on the euro and pound, with EUR/USD hitting a two year low below 1.2660. This was on the back of positive news for the economy that growth could be at the highest level since 2011, bringing about expectations of the Fed becoming more hawkish, further appreciating the dollar.

The FTSE opening the week up at 6640 but couldn’t hold its with Tesco, now in the process of a regulatory investigation after its huge accounting errors, continuing to fall further on its plunge from last week, reaching as low as 177.75 - a huge decline for the FTSE 100 company.

Sainsbury’s joined Tesco in free fall. In addition, the start of the week brought poor results in regard to British mortgage approvals, which slipped to a 3-month low in August, reinstating the expectations that the housing market is cooling off. All of this news accumulated to a disappointing week for the FTSE, leaving it down at 6472, a 2.5% fall over the week.

European markets were relatively stable by mid-week due to geo-political issues in Hong Kong and in anticipation of the ECB conference. As the end of the week came a dramatic sell off of the DAX on Thursday afternoon created a frenzy in the market as the DAX dropped to a low of the week at 9162.5.

This fall came as a shock to the market. The ECB conference didn’t create any major shocks with interest rates staying level at 0.05%, however a plan to buy further asset backed securities will be introduced at some point in the fourth quarter.

The Dow has had a steady week, managing to keep clear of the kind of sell offs that both the DAX and FTSE suffered from, dropping to around 16750. However  it has managed to stabilise its moderate fall and claw back some of the losses moving back up to 16855.4 and then posted further gains  on Friday afternoon after Non-Farm Employment Change was announced at 248K, 32K above the forecasts. This resulted in the dollar making further gains and the Dow up to 16892 at the time of writing this, consequently up 93 points today.

Taking a brief look at commodities Brent Crude Oil took a tumble, potentially due to the appreciating dollar causing UK and European firms to reel at the price of oil. Brent Crude hit a low yesterday at around 9163 but managed to get back up to 9358 this morning.

Overall, the deterioration of the major markets was due to a number of factors filtering down to investors’ expectations. The Hong Kong protests were the main news on the agenda, however other factors did add to the declines, for instance, an Ebola patient in the US and manufacturing PMI at 57.5, which was beneath the forecast.

Stock of the week – Easyjet

The FTSE 100 was full of large fallers namely Tesco and Sainsbury so easyJet seemed to be the shining light in the FTSE. EasyJet was up 5.44% on Friday morning to a weekly high of 1444.50 having opened at 1392 on Monday morning.

Economic Calendar
 
Monday

• CAD - Ivey PMI
• NZD – NZIER Business Confidence

Tuesday

• JPY – Monetary Policy Statement
• AUD – Cash Rate
• RBA Rate Statement
• JPY – BOJ Press Confidence
• GBP – Manufacturing Production
• CAD – Building permits

Wednesday

• USD – FOMC Meeting Minutes

Thursday

• AUD – Unemployment Rate
• GBP – Asset Purchase Facility
• GBP – Official Bank Rate
• USD – Unemployment Claims
• EUR – ECB President Draghi Speaks

Friday

• CAD – Unemployment Rate