US markets fall, Eurozone outlook bleak - 24.9.2014

Stock markets in US fell on Tuesday for the third straight session. Investors are worried about slowing global growth and rising tension in Middle East. The S&P 500 (SPX) closed 11.52 points, or 0.6%, lower at 1,982.77. The Dow Jones Industrial Average (DJI) shed 116.68 points, or 0.7%, to 17,056.00. The preliminary reading of U.S. manufacturing conditions was unchanged in September, keeping the index at a 52-month high, according to data released by Markit Tuesday. Experts see the overall outlook for stock markets positive as the Federal Reserve continues monetary easing, earnings continue to increase and there are no better alternatives for investment. But with the tapering of Fed’s asset purchasing program the support for the rising market trend is weakening. Google Inc. shares fell 1.1% after the EU's competition chief Joaquín Almunia said the search company must improve its proposed settlement over antitrust concerns or face formal charges. The preliminary Composite Purchasing Managers’ Index for Eurozone, released by Markit, indicated a drop to 52.3 for September from 52.5 in August. The index is seen as a good indicator of growth, and the drop from expectations of no change from August points to worsening economic outlook for Eurozone. The latest survey by Markit had indicated 0.3 percent economic growth in the third quarter. After Germany’s economy shrank in the last quarter and France posted a zero growth rate, the European Central Bank cut the benchmark lending and deposit rates in a surprise move earlier this month. This time though no more changes in ECB policy are expected when the governing Council meets next week. The investors expect European markets to open lower on the backdrop of disappointing economic data.

Today a number of economic indicators are due both in Europe and North America. At 10:00 CET the German Current Assessment index for September, which measures current business conditions in Germany will be released. Simultaneously, the German Business Expectations index, which measures how German businesses foresee the next six months, will be published together with the German Business Climate index for September, which measures how businesses are satisfied with their current situation compared with the last month. In our opinion the outlook is negative. At 12:00 in US the New Home Sales data for August will come out. Here forecast is positive with a positive growth rate of over 4 percent compared with previous month’s drop of 2.4%. And at 18:05 CET the President of the Federal Reserve Bank of Cleveland Loretta Mester will speak in Cleveland.

Oil is falling with increased US production and lower demand from slowing Chinese economy, the world’s second-biggest oil consumer after US. Brent crude, a benchmark for more than half of the world’s oil, has dropped 16 percent from a June 19 peak this year and was at $97.22 a barrel at 10:17 a.m. Tuesday on the ICE Futures Europe exchange in London. OPEC Secretary-General Abdalla El-Badri said September 16 the cartel may reduce its official daily limit by 500000 barrels to 29.5 million barrels next year. The decision OPEC will make in November will take account the moves by other world producers who account for two thirds of world production, according to U.A.E.’s oil minister Suhail Al Mazrouei.

The strong dollar and improving US economy weigh on gold but falling Asian markets spurred some investor interest yesterday. Spot gold rose 0.7 percent yesterday with falling dollar. But dollar is expected to stay strong and continue the downward pressure on precious metals. Investors count on increasing physical demand to provide some support for gold but the physical demand has been sluggish.