Forthcoming ECB meeting and further US earnings reports weigh on markets - 20.10.2015

On Monday the US stock market was nearly flat due to the mixed expectations of the market. The US Dollar index, a measure of the dollar’s strength against the basket of six major currencies, closed 0.46% higher. The technological and biotechnological companies stocks were on increase with Nasdaq Biotech index up by 0.6%. But the caution about this week’s forthcoming earnings reports weighed on the market which resulted in major US stock indices – S&P 500, Dow Jones industrial average and Nasdaq – being flat. Thomson Reuters data forecast the 4% slump in S&P 500 earnings in the 3rd quarter from a year ago. Morgan Stanley was among the bottom performers of the day losing 4.8% after the report which showed the bank’s profits plunged by almost half in the 3rd quarter. The Morgan Stanley quarterly data proved to be the weakest among the major US banks falling for the second quarter in a row. Cimarex Energy Co and Marathon Oil Corp fell both 5.2%, Pioneer Natural Resources fell 5.1%, Murphy Oil Corp fell 4.7% due to the sharp fall in oil prices. Exxon lost 1.8% and Chevron lost 1.4%. Nevertheless, the losses of the stock market were pared by the positive performance of Quanta Services (+3%), Delta Airlines (+2.3%), Intel (+1.7%), Apple (+0.6%). The trade volume on the US exchanges was 6.0bln stocks which is slightly less than the daily average of 7.3bln for the past 20 trading days. US homebuilder sentiment improved in October with NAHB/Wells Fargo housing markets index growth exceeding expectations.

This week several quarterly earnings reports from Dow Jones components, including Coca-Cola, Caterpillar and Boeing, will come out. Today at 13:30 CET the US September Housing starts monthly change will be released, the reading is expected to grow to +1.9% from -3.0%. At the same time the US September Building Permits monthly change will be released, the tentative outlook is negative. At 14:00 CET Fed governors William Dudley and Jerome Powell will speak at Market Conference in New York City.

The European investors are focused on the forthcoming ECB meeting due on Thursday this week. Having touched the 1.15 resistance level last week, the euro was weakening yesterday against the US dollar as investors were closing their positions avoiding risks ahead of the ECB meeting where Mario Draghi can give some hints about the future monetary policy in Eurozone. European stocks closed higher on Monday after the release of better-than-expected economic growth data from China. The FTSE Eurofirst index climbed 0.4%, German DAX 30 index added almost 0.8%. Late on Monday the ECB’s governing council member Noyer said the bank’s quantitative easing programme is “well calibrated and doesn’t need to be adjusted”. No important macroeconomic data is expected today in eurozone.

Nikkei index closed today 0.42% up with telecommunication services companies adding 3.9% and utilities losing 1.9%. The dollar was flat against the yen at JPY119.39 ahead of merchandise trade balance data. No important macroeconomic data is expected today in Japan.

Brent crude oil prices lost around 2% yesterday on Chinese demand concerns and the rise in the Saudi stockpile. Today oil prices continue falling ahead of this week’s oil producers meeting as investors do not expect any real measures to be undertaken to struggle the global oil supply glut. Brent crude oil is falling today 0.5% to $48.37 a barrel on London’s ICE Futures exchange while WTI futures are losing 0.1% to $46.25 a barrel.

Today Gold spot prices are edging higher (+0.3%) ahead of the ECB meeting.