UK GDP Rises 1.0 pc in 3Q

Published by Filipe R. Costa on Thu, 25/10/2012 - 11:05
London Olympics

Daily Market Commentary for October 25: The sell off in equities continued yesterday as investors are concerned about global growth and corporate earnings. Economic data in the US added to the continued improvement in the construction sector. In Europe, PMI showed how bad things are. In the UK, GDP surpassed the more optimistic expectations.

Markets continue in downtrend despite all FED efforts to inflate stock prices with QE3. Interesting is the fact that not even gold was able to trigger some buying interest. The yellow metal is down 1.6% since the start of QE3. US home sales rose to the highest level in two years but the FED reiterated low growth expectations for the economy not helping the case to buy equities. The FED also kept interest rates at the current 0.25% level and hasn’t touched the current $40bn asset-buying program. Some voices have been heard about the possibility of the FED increasing QE3 but it does not seem that is on FED’s plans.

Economic data in the Eurozone was really poor yesterday with PMI across the monetary union at very depressed levels. Not even Germany was spared, seeing both PMI and Ifo data below expectations.

Some good news came this morning with UK 3Q GDP reported at 1.0%. That’s right a very healthy increase, at least when considering the country was on a double dip. With this rise, the annual pace of growth was brought to flat from -0.5%. Services and industry contributed positively for the numbers while the construction sector continues its downtrend and negative contribution. Many attribute the gains to the olympics but, even though difficult to estimate, most of the rise is certainly not due to it. the latest data has been showing important improvements.

The Euro is gaining momentum since the close of the US session yesterday but there is no economic data supporting it. I prefer to keep out of this currency as it has been showing some loss of steam when trading above 1.3000. With economic data in disfavour this is not the best time to open long positions. The risk of a equity rally is huge such that keeping a short position in Euro may also be risky at this time. I prefer a short in the pair EUR/AUD.

Name Last price Close Price % 5-Day % YTD %
Crude oil (Light Sweet) Composite 24/10/2012 8577 -1.06 -6.76 -13.36
Nikkei 225 24/10/2012 8954.25 -0.67 1.68 5.9
Crude oil (Brent) Composite 24/10/2012 10645 -0.63 -5.45 -0.89
EUR/GBP - £ per Euro 24/10/2012 0.8088 -0.58 -0.48 -2.93
Nasdaq 100 Index 24/10/2012 2655.55 -0.39 -4.33 16.58
Gold (LBM) $ 24/10/2012 170460 -0.32 -2.59 8.79
S&P 500 24/10/2012 1408.75 -0.31 -3.57 12.02
Dow Jones Industrial Average 24/10/2012 13077.3 -0.19 -3.54 7.04
EUR/USD - US$ per Euro 24/10/2012 1.2965 -0.07 -1.12 0.08
FTSE 100 24/10/2012 5804.78 0.12 -1.8 4.17
DAX (Xetra) 24/10/2012 7192.85 0.27 -2.73 21.95
GBP/USD - US $ per £ 24/10/2012 1.603 0.5 -0.65 3.22
IBEX 35 24/10/2012 7791.5 0.57 -4.14 -9.04
CAC 40 24/10/2012 3426.49 0.59 -2.86 8.44
FTSE MIB 24/10/2012 15706.5 0.82 -3.25 4.09