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Breaking financial world news from 25 october, 2019.

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Breaking news

ECB leaves policy settings unchanged, warns about downside risks

The ECB predictably held its monetary policy stance steady at its October meeting. The interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility remained unchanged at 0.00%, 0.25% and -0.50% respectively. The regulator reiterated that asset purchases will be restarted at a monthly pace of EUR 20 bn from November 1. According to ECB President Mario Draghi, incoming data indicates “more protracted weakness, prominent downside risks, muted inflationary pressures.” He also said that the ECB is providing substantial monetary stimulus to the Eurozone economy. The Governing Council reiterated the “need for a highly accommodative stance of monetary policy for a prolonged period of time to support underlying inflation pressures.” Among the downside risks to the euro area growth outlook, Draghi noted the prolonged presence of uncertainties related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets. He expects that euro area annual inflation, which decreased to 0.8% in September, the lowest reading since 2016, will decelerate further before recovering by year end. “At the same time, ongoing employment growth and increasing wages continue to underpin the resilience of the euro area economy,” he said. Notably, the ECB’s October meeting was the last for Mario Draghi, who is stepping down after eight years in office to be replaced by Christine Lagarde, who takes over on November 1.

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US new home sales drop in September

US new home sales fell 0.7% m-o-m to an annualized rate of 701,000 in September, the US Department of Commerce reported. Meanwhile, last month the average home price declined 8.8% y-oy to USD 299,400, or the lowest level since February 2017. New homes in the US market have contracted for the fourth month in a row, reaching 321,000 as of late September. Given the pace of sales in September, it would take 5.5 months to sell them, as in August. Experts think that the US housing market remains stable despite a modest drop in September sales as wage growth and lower interest rates offset a decrease in the inventory of homes for sale. Even though new homes account for just 10% of the US housing market, new home sales are registered shortly after sale/purchase agreements are signed, thus making them a more accurate indicator of housing market conditions.

Eurozone composite PMI remains near 2013 lows

Based on preliminary IHS Markit data, the Eurozone composite PMI rose marginally from 50.1 in September to 50.2 in October. However, this is the second lowest reading since July 2013. The manufacturing PMI remained unchanged at 45.7 in October, while the services PMI grew from 51.6 to 51.8. IHS Markit chief business economist Chris Williamson claimed that the Eurozone economy began the fourth quarter in a state close to stagnation, with preliminary PMIs pointing to quarterly GDP growth of slightly less than 0.1%. He added that a recession in the manufacturing sector remains the sharpest since 2012 and the services sector continues to surprise, with new orders rising at the lowest pace in nearly five years.

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Markets

US: Dow Jones remains in the red

Key US stock indices saw mixed trading on Thursday, October 24, amid mixed quarterly earnings releases. Specifically, the robust results posted by Microsoft and PayPal lent support to the Nasdaq and the S&P 500, while 3M’s lackluster performance weighed on the Dow Jones.

On the macro data front, US durable goods orders fell 1.1% y-o-y in September vs. an expected 0.8% y-o-y drop after rising 0.3% y-o-y a month ago. Initial US jobless claims decreased from 218,000 to 212,000 compared to a projected contraction to 215,000. Meanwhile, new home sales totaled 701,000 as expected, down from 706,000 in August.

Recapping the indices, the Dow Jones Industrial Average ticked down 0.11% to 26,805.53, the S&P 500 edged up 0.19% to 3,010.29, and the Nasdaq Composite closed 0.81% higher at 8,185.80.

In commodities, December NYMEX WTI rose 26 cents to USD 56.23/bbl, while December COMEX gold jumped USD 9.00 to USD 1,504.70/oz. The 10-year US government bond yield ticked up 0.01% to 1.77%.

Microsoft and PayPal made the biggest contribution to gains on the S&P 500 and the Nasdaq, up 2% and 8.6%, respectively. Software developer Microsoft reported a 21% y-o-y increase in 3Q net income to USD 10.68 bn, or USD 1.38 per share, while analysts on average forecast USD 1.25 per share. Revenue, in turn, climbed 14% y-o-y to USD 33.06 bn vs. USD 32.23 bn forecast. Payment system operator PayPal reported adjusted 3Q EPS of 61 cents per share vs. 52 cents per share expected. In addition, third-quarter revenue increased to USD 4.38 bn compared to the median consensus of USD 4.35 bn.

Among the underperformers, industrial conglomerate 3M pulled back 4% as quarterly revenue missed analyst expectations and the company lowered FY guidance due to weaker demand in key markets, including China. 3Q revenue fell 2% y-o-y from USD 8.15 bn to USD 7.99 bn, while analysts on average expected USD 8.17 bn. Based on the company’s updated projections, this year adjusted EPS could total USD 8.99-9.09 per share compared with USD 9.25-9.75 per share.

In the blue-chip universe, more than two thirds of liquid names landed in the red, with the decliners, in addition to 3M, including Johnson & Johnson (-1.9%) and McDonald’s (-1.6%), while Dow (+4.7%), Visa (+2.8%) and United Technologies (+2.5%) stood out among the outperformers.

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S&P 500

The daily chart shows that the S&P 500 has approached the upper line of Bollinger Bands, while the Slow Stochastic Oscillator is in overbought territory. As a result, the index could move lower in the short term.

Breaking financial world news from 25 october, 2019.

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Europe: benchmarks close higher with no surprises from ECB

Key European indices landed in positive territory on Thursday, October 24 as investors were focused on corporate earnings releases, the outcome of the ECB meeting alongside Mario Draghi’s policy statement, as well as Brexit-related developments.

Notably, the ECB left the benchmark lending and deposit rates unchanged at 0.0% and 0.5%, highlighting that they will remain at these levels or move lower until Eurozone inflation reaches the policy target. ECB President Mario Draghi noted that the regulator is providing significant monetary stimulus to the regional economy and will stick to its accommodative stance for as long as needed.

Moreover, the October manufacturing and services PMIs (preliminary) for Germany and the Eurozone came out yesterday. Germany’s manufacturing PMI stood at 41.9 after 41.7 a month earlier, but fell short of 42.0 expected. For the entire Eurozone, the indicator clocked in at 45.7, while analysts, on average, projected 46.0, unchanged from September. The services PMIs for Germany and the Eurozone reached 51.2 and 51.8 vs. expectations of 52.0 and 51.9, respectively, following 51.4 and 51.6 in the previous month.

Recapping the benchmarks, the UK’s FTSE 100 advanced 0.93%, the French CAC 40 firmed 0.55%, and the German DAX rose 0.58%. The regional barometer STXE 600 closed 0.59% higher at 397.37.

German chemical major BASF surged 3.4% after reporting better-than-expected quarterly profit.

French fashion company Hermes International added 1.95% after reporting an increase in Q3 revenue.

Semiconductor maker STMicroelectronics spiked 8.5% as quarterly revenue beat the consensus forecast.

AstraZeneca and Daimler soared 5.6% and 3.3% as investors were heartened by their earnings reports.

Notable decliners included Finnish telecom equipment maker Nokia, which tanked 23.4 after cutting guidance for 2019-20.

Europe’s main stock indices have been showing mixed performance during the first half of Friday, October 25 as investors continue to monitor news surrounding the US-China trade dispute and the Brexit saga, while digesting incoming corporate earnings reports.

Notably, the media reported that China will be able to purchase USD 20 bn worth of US agricultural products in the first year after the two countries sign a trade agreement. Meanwhile, British PM Boris Johnson said that he intends to call a snap general election to be held on December 12.

Adding to downbeat sentiment, weak macro data came out of Germany. The country’s GfK Consumer Confidence Index clocked in at 9.6 in November vs. 9.8. expected, while the month-earlier reading was revised down to 9.8 from 9.9. Furthermore, the Ifo Business Optimism Index for October remained unchanged at 94.6 compared to 94.5 projected.

By 08:32 GMT, the UK’s FTSE 100 pulled back 0.29%, the German DAX eased 0.17%, while the French CAC 40 ticked up 0.02%. The regional indicator STXE 600 was off 0.18% at 396.66.

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DAX

On the daily chart, the German DAX is trading near the upper line of a rising band near, while the Slow Stochastic Oscillator has entered overbought territory. As a result, the benchmark holds limited short-term upside potential.

Breaking financial world news from 25 october, 2019.

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Asia: markets end the week on positive note

Asian stock indices mostly extended gains on Friday, October 25. Notably, the composite regional barometer MSCI Asia Pacific rose 0.2%, up 0.9% on the week. Investors continue to monitor news surrounding the US-China trade dispute and the Brexit saga, while parsing incoming corporate earnings reports. In particular, Vice President Mike Pence was hopeful that the US and China will sign off on a formal phase one agreement. He recognized that China remains a “strategic and economic rival” to the US, and criticized Beijing’s actions in Hong Kong.

Meanwhile, the Bank of Japan released a semi-annual report, in which it warned that increased investment in foreign risk financial assets by Japanese banks makes them “more susceptible to the effects of overseas financial cycles.” However, the regulator thinks that the country’s financial system remains stable, although profitability keeps declining amid negative interest rates and weak demand for loans from a shrinking population.

Recapping the benchmarks, the Japanese Nikkei 225 added 0.2%, the Australian ASX firmed 0.7%, the South Korean KOSPI ticked up 0.1%, the Chinese Shanghai Composite rose 0.5%, while Hong Kong’s Hang Seng slipped 0.4%.

In Japan, telecom major SoftBank extended losses, dipping 1.2% on the day. Retailer FamilyMart shed 1.7%, while mobile device screen maker Screen Holdings advanced 2.5%.

In Hong Kong, insurance company Ping An Insurance Group and high-tech player AAC Technologies retreated 3.9% and 1.1%. The list of outperformers included CSPC Pharmaceutical and oil company CNOOC, which picked up 5.8% and 0.4%.

South Korean microchip maker SK Hynix surged 3.6%, still drawing support from a positive earnings report released earlier. LG Electronics gave up 1.2%.

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Hang Seng

From a technical standpoint, a symmetrical triangle could be shaping up on the Hang Seng, with the benchmark likely to drift slightly lower towards the 50-day moving average at 26,300.

Breaking financial world news from 25 october, 2019.

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Commodity markets

Oil has been trending lower on Friday but is set to log solid weekly gains. Since Monday, Brent has spiked 3.5% and WTI is up 4.3%. A positive factor for the crude market of late has been some improvements in global financial market conditions in anticipation of further monetary easing by the world’s leading central banks. Crude drew some support from a sharp drawdown in US oil inventories (aggregate oil and product stockpiles dropped to May 2019 lows) and media reports that oil-producing countries could put deeper output cuts on the table at the December meeting.

At the same time, an oil market rally is capped by concerns that the global economy will continue to expand at a slow pace, dampening oil demand. In a recent research note, Julius Baer analysts noted that the overall picture for the oil market remains the same. Participants are mainly focused on the pace of economic growth and its adverse impact on demand. Whereas OPEC+ caps oil supplies, Canada, Brazil and countries bordering the North Sea basin boost output. US shale oil producers are seeing a narrower space in the market amid ample global oil inventories.

Non-ferrous metals have been trading marginally lower on the LME, while gold advanced to USD 1,510/oz.

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Breaking financial world news from 25 october, 2019.

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