The EU summit in Brussels has just concluded and there were no significant developments as far as measures and Spain were concerned. Spain’s Prime Minister Mariano Rajoy told reporters that he is not pressured to seek a sovereign bailout for the ailing nation. “I don’t see any European Union leader telling me I should use the mechanism the ECB has put in place,” Rajoy said. EU will pursue a framework agreement that enables the ECB to become the main supervisor for the Eurozone banks by January 1.
The second dominant theme for the market this week was the disappointing earnings results released by US companies.
Stocks and Commodities
The Asian markets were led on Friday by Nikkei, Hang Seng, ASX, Karachi SE 100, and Bursa Malaysia. Japan’s Nikkei 225 clinched its largest weekly gain this year. Hong Kong’s Hang Seng also recorded its longest streak of daily gains in nearly two years.
Unlike Asian stocks, the European and US markets were predominantly down when trading ended Friday. DJIA, S&P 500, Nasdaq slipped 1.52 percent, 1.66 percent, and 2.19 percent, respectively. In Europe, FTSE 100, CAC 40, and DAX all slipped by less than one percent. Companies like General Electric, Microsoft, AMD, McDonald's, and Chipotle Mexican Grill led the drop as they missed analyst estimates as sales growth slowed.
On Friday, gold went for a second weekly fall and its largest one-day drop in around three months. Gold has been under pressure throughout the week from a raft of disappointing or weak economic data. Gold reached a lifetime high price of $1,920.30 in September last year, while it has failed to breach $1,800 so far this year. Oil also fell the most in two weeks on economic growth concerns, particularly disappointing quarterly earnings results from the US. Natural gas, silver, copper, aluminum, and platinum also slipped.
Currencies also followed the main sentiment of the market. The major pairs did well on the first half of the week until market concerns kicked in mid-week.
GBPUSD started the week on a good note but was unable to sustain the momentum above 1.6100 and breach of 1.6200. It consequently made a sharp drop, erasing gains and even closing the week at 1.6001, more than 60 pips below the weekly open.
EURUSD retraced half of its 250-pip climb this week, falling from 1.3138, its highest since mid-September. Economic growth concerns and the fall in metal prices, among others, help precipitate the decline, closing the week at 1.3022. Next week would be pivotal on whether EURUSD will be able to maintain its strength throughout October and foothold of the 1.3000s. A drop below 1.3000, although still in general bullish territory, would reduce the gain for the entire month.
AUDUSD suffered the same fate, climbing 200 pips and retraced nearly half by Friday’s close.
The Week Ahead
After a raft of economic data in recent weeks, next week will be relatively average in terms of economic data releases, with Wednesday getting the majority of the data releases for the entire week. Monday and Friday are relatively quiet; On Tuesday, expect the release of Canada's retail Sales data and BOC Rate Statement, BOE's Governor King speech; For Wednesday, Australia's CPI, Europe's Manufacturing Data, ECB's Draghi speech, US New Home sales, Canada's BOC Monetary Policy Report and Press Conference, US FOMC Statement; Thursday, New Zealand rate announcement, UK's Preliminary GDP, and US Core Durable Goods Orders, Unemployment Claims, and Pending Home Sales; and finally on Friday, we will see the Advance GDP data from the US.