All the day’s economic and financial news, as shares drop in China but push higher in Europe
- Latest: Euro drops as Merkel gives up CDU leadership
- Bloomberg: World markets have lost $8trillion in October
- Shanghai Composite Index has lost 2% today
- FTSE 100 opens 36 points higher
Elsewhere in the eurozone, Italy’s stock market is flying after S&P left the country’s credit rating unchanged on Friday night.
The FTSE MIB has leapt by 2.5%, and Italian government bonds are also rallying.
BREAKING: In a major development, Angela Merkel has decided not to stand for re-election as the chair of her CDU party in December.
Merkel took her decision after an election drubbing over the weekend, which saw voters in Hesse abandon the CDU in favour of the Green party and the anti-immigrant Alternative für Deutschland (AfD).
It seems likely Merkel will remain German Chancellor, but give up leadership of her CDU party, as is being reported by some German media. It’s not quite the end, yet…
German Chancellor Angela Merkel has told leaders of her Christian Democrats (CDU) that she will not seek re-election as party chairwoman at a conference in early December, a senior party source said.
Merkel has been CDU chairwoman since 2000 and giving up the role would start a race within the party to succeed her as chancellor.
European stock markets are all showing gains this morning.
Bank stocks are up, following HSBC’s strong results, along with healthcare groups and industrial companies.
Banking giant HSBC is pulling the London stock market higher, after growing its profits sharply.
“HSBC may be the second biggest company on the UK stock market, but its profits are predominantly emanating from its historic home in the far east. Three quarters of the bank’s profits so far this year have come from its Asian operations, leaving the European business trailing in its wake.
Profit growth has been broad-based across HSBC’s main banking activities, and what’s positive is that’s coming from a rising top line rather than simply cost-cutting, which can only deliver results for so long. Indeed adjusted operating costs have actually ticked up, though that’s to support investment in growth opportunities, notably in the bank’s digital proposition.
Last week the US stock markets fell into correction territory, after several heavyweight companies posted disappointing results:
Global stock markets had a terrible time last week as investor sentiment continued to sour. Concerns about higher interest rates in the US, along with political uncertainty in Italy as well as geopolitical concerns played on investors’ minds. Last week, Amazon and Alphabet both released quarterly figures and the revenue components missed market estimates and that added to the decline. The major US indices enjoyed a positive run over the summer, and there was a sense that valuations were lofty, particularly for the tech sector.
The S&P 500 is now in correction territory, which means it had fallen more than 10% from the recent peak, and this underlines how large the correction has been. The Shanghai Composite lost over 2% overnight after China confirmed that industrial profit fell for the fifth straight month.
Financial blogger Jeroen Blokland says a range of factors have hurt the markets this month. However, that doesn’t mean we’re facing a repeat of the 2008 crisis.
This chart by Bloomberg shows that global equities have lost almost USD 8 trillion in market cap in October, the worst sell-off since 2008. However, the absolute numbers can be deceptive as the total market capitalization has increased by roughly 50% since start of the financial crisis.
But more importantly, while there are definitely a number of factors that are negatively impacting markets (China-US trade war, rising geopolitical risk, Italy’s massive debt pile – to name just a few), current economic circumstances make it less likely that a crisis like the one in in 2008 will happen now. Of course, things could change quickly, especially if market sentiment remains as depressed as it is now, but this might be a good moment to take a step back and refocus on the fundamentals.
Today’s losses in China suggest markets have further to fall, warns Hussein Sayed, chief market strategist at foreign exchange broker FXTM:
The steep sell-off in U.S. equity markets suggests October could be the worst month since the global financial crisis of 2008. Seven trillion dollars have already been wiped from the global market cap, and still there are no signs of bulls returning.
Chinese stocks fell today with the CSI 300 declining more than 3% while the Yuan remained trading near a decade low. The Nikkei 225 gave up gains of more than 1% to trade in negative territory. Moving against the trend were stocks in Australia, with the ASX 200 gaining more than 1% supported by the healthcare and telecom sectors.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
October has been a pretty brutal month for the markets. Over the last four weeks, trillions of dollars of value have been wiped off bonds and shares, as nervous investors have sold up.
Equities globally have lost almost $8 trillion of value this month, set for the biggest wipeout since the height of the financial crisis a decade ago on concerns ranging from the peak being past for earnings growth to the U.S.-China trade war to the end of central bank quantitative easing. Traders are paring wagers on Fed rate hikes for next year, with markets now expecting fewer than two quarter-point increases in 2019, compared with three that policy makers project.
“There’s room for a bit of a downside to go, because I do see this as being largely a structural shift in markets,” Kyle Rodda, a market analyst at IG Group in Melbourne, said on Bloomberg Television. “Sentiment is still to the downside, is still quite bearish and there will be a little while for this correction to play out.”
Link : Markets edgy in worst month since the financial crisis – business live