Global equity markets fell with Crude Oil prices on Friday as hopes for an agreement at an informal meeting in Algeria this week between OPEC & non-OPEC producers faded. Oil prices have gained on Friday following a report by Thomson Reuters that Saudi Arabia early this month had offered to cut production if Iran agreed to freeze its current output around 3.6m barrels per day. However prices fell after sources familiar with the Saudi policy said that talks in Algeria would be more of a consultation rather than any firm agreement. Both WTI & Brent crude oil declined -3.97% & -3.69% respectively shown on the first chart below at the same time as a Baker Hughes U.S. rig count increased from 506 to 511 as more U.S. production comes back online.
Elsewhere commodities were mostly lower dragged down by oil and a stronger U.S. dollar, natural gas declined -1.77% as did the Thomson Reuters CRB index -1.73% while copper managed to gain +0.23%. Spot gold finished relatively flat, up just +0.04% while spot Silver declined -0.96%.
U.S. equity markets declined following two days of gains as a preliminary survey of U.S. Manufacturing PMI (MoM Sep) missed expectations for a reading of 52 with an actual of 51.4. Both the S&P 500 & Nasdaq 100 finished -0.57% & -0.66% weaker respectively, led lower by Energy (-1.23%) & Technology (-0.87%) while Telecommunication was the only sector to finish positive for the session up +0.29%. Meanwhile the U.S. dollar index gained +0.53% as bond yields fell on both two-year & ten-year government debt by -2.4 & -1.7 basis points to 0.7540% & 1.6150% respectively.
European equity benchmarks were broadly lower following mixed PMI data while French GDP missed expectations of +1.4% with an actual reading of +1.3%. Euro-zone manufacturing PMI (MoM Sep) was higher than expected at 52.6 vs estimates of 51.5, services PMI was lower than forecast at 52.1 vs 52.8 expected and the composite measure for the same period was 52.6 vs 52.8. The same measures out of Germany was also mixed, manufacturing PMI surpassing estimates of 53.1 with an actual reading of 54.3, services PMI at 50.6 vs 52.2 and a composite measure at 52.7 vs 53.6. The yield on two-year German Bunds was unchanged at -0.669% while the yield on ten-year debt advanced +1.1 basis points to -0.081%.
Both the Euro Stoxx 600 & DAX declined -0.72% & -0.44% respectively as the Euro strengthened +0.16% against the U.S. dollar. Over in the U.K. equities were flat as Jeremy Corbyn called for a clean slate as he strengthened his position as the leader of the U.K. Labour party at an annual conference in Liverpool. This follows form an attempted coup within the party following the Brexit referendum, the FTSE100 finished -0.04% lower as the GBP/USD fell -0.87%.
In Japan both the Nikkei & Topix were modestly lower, down -0.32% & -0.23% respectively while the Yen weakened -0.24% as investors continue to digest the latest policy change from the Bank of Japan to controlling the yield curve. The yields on two-year government debt gained +0.7 basis points to -0.215% as did the yield on ten-year debt up 2.5 basis points to -0.048%, the Bank of Japan has stated that it aims to target yields of around 0% on the ten-year securities.
The USD/CAD fell -0.89% against the U.S. dollar and the TSX index declined -0.67% as official data showed that the headline consumer price index missed expectations of +1.4% with an actual of +1.1% while a core measure that excludes more volatile items such as food and energy also missed estimates, up +1.8% with forecasts for a +2.0% increase.
Domestically the Australian dollar was -0.31% weaker against the U.S. dollar as the S&P/ASX 200 finished +1.06% higher.Meanwhile we can expect a weaker start to trading this morning with ASX SPI200 futures down 24 points.
Data releases:
- BOJ Governor Kuroda speaks in Osaka 3:30pm AEST
- German IFO Business Climate, Current Assessment and Expectations (MoM Sep) 6:00pm AEST
- U.S. New Homes Sales (MoM Aug) 12:00am AEST
This article was written by James Woods - Global Investment Analyst, Rivkin Securities Pty Ltd.
