Financial market research and analysis

European stocks leap on open

A weakening euro and bullishness washed over from Wall Street have kick-started big gains in European stock markets. The German DAX index is probing new records and even Spain’s IBEX is seeing some gains. Stock market investors are treating the political upset in Catalonia as a Spain-only issue.

Ferguson top brass on the FTSE 100

The FTSE 100 was flat to lower in early trading on Tuesday. Losses on UK shares when other European markets are rising is thanks in part to the British pound rallying off its lows ahead of UK construction data. The FTSE has had a positive start to the final quarter of 2017 with a one-month high but now approaches 7450, a level which has resisted higher prices since early August.

Ferguson shares were top risers on the FTSE 100 after the plumbing supplies firm reported a share buyback alongside earnings. Its new name and new US-focus appear to be doing the trick. The switch away from slower European markets, including a “pretty weak” UK division to the US where business confidence is on the rising boosted full-year pre-tax profits by 75%. Ferguson now looks like a good play within UK equities on Trump’s promised US infrastructure spending.

More records on Wall Street

Futures are pointing to a higher open on Wall Street following fresh record highs on Monday. US small caps have been leading the gains with the Russell 2000 advancing 1.25%. Small US firms should be the biggest beneficiaries of lower corporate taxes and less burdensome regulation. For smaller firms, the cost of compliance with regulations is proportionately higher and they often don’t have the accounting expertise to avoid taxes.

Donald Trump has made some progress toward his plans for tax reform and deregulation. Trump was scheduled to lead a summit on deregulation summit on Monday. Deregulation can an immediate positive effect on the cost of doing business and is lower hanging fruit for Trump because some of it is executive orders issued by Obama, which he can easily repeal without Congress.

RBA stays pat, euro at 6-week low

The euro has sunk to a 6-week low in the Asian trading session. Political upset has returned to the European continent and the euro is the fall guy. From German Chancellor Angela Merkel scraping out an unconvincing win in national elections to the police violence surrounding the referendum in Catalonia. It’s a reminder that even with an impressive rebound in growth, Europe doesn’t quite have its house in order.

The backdrop for the falling euro is a rapidly accelerating uptrend in the US dollar. The dollar shot higher again on following a positive surprise from ISM manufacturing data for September. There was no evidence of hurricane disruption in what was the strongest reading since June 2011.

The Aussie dollar fell on Tuesday morning after the Reserve Bank of Australia kept its cash rate at 1.5%, saying the rate was appropriate according to its growth and inflation forecasts. The RBA made its customary jawboning of the Aussie saying its strength will weigh on the employment outlook and prices pressures. The RBA look content to ride the current US dollar strength toward a more competitive Aussie dollar.

Oil going into reverse

Oil prices have continued the run of poor form over the past few days. The failure to sustain a breakout to new 2017 highs has seen sellers come back into the market in force. A Reuter’s poll showing compliance fell and output rose by 50,000 barrels a day in September among OPEC countries has dented belief in an improving supply outlook.

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