Financial market research and analysis

The European stocks are subject to heavy headwinds this morning. The FTSE is down by 1.20%, EasyJet, Intercontinental and Pearson are leading losses.

The UK miners pair losses in London news that the copper producers would expand their production in order to fight the falling revenues on cheapening prices. The new production plants would increase the profitability of new miners even with a copper at $2/lb. We remain cautious on the new game plan, as without the pick-up in demand, a deeper oversupplied market in copper could then drag the copper prices well below $2/lb and jeopardise revenues expected form the most efficient miners. In addition, pumping up the production may not be the best solution for highly leveraged companies, as Glencore, in their efforts to restructure debt.

As the UK gets involved in war against the IS…

PM Cameron announced an additional £12 billion to push the defence budget to £178 billion in 10 years. The additional government spending should in theory steepen the future inflation path and push the Bank of England to kick-off the policy normalisation earlier than previously anticipated. Higher government spending is also expected to give a bump to the UK’s GDP in the coming quarters. In this context, BoE Governor Carney’s testimony is under close watch today.

Fed hawks watch the US GDP

The US will publish its 3Q second GDP estimate today and the consensus is an optimistic upside revision to 3.2%q/q annualised, from 2.1% last printed; the core PCE is expected to stagnate at 1.3%. Any positive surprise will reinforce the Fed hawks’ stance for a December rate hike. Presently, only a very bad surprise could dent the appetite walking into the December FOMC meeting.