The third quarter has ended and US markets have managed to record this on the positive territory. The strong economic growth is without any doubt is behind this, which has enabled US indices to continue their seventh quarter in a positive territory.
But, do we have a spill over effect of this positive growth in the EU, surely not yet, because the picture is very dark when you compare the European indices performance for the quarter to the US indices. For instance, the German DAX has been hit hard over this quarter and recorded worst quarter, which has not been seen since 2012. This is mainly due to the low inflation, slowing growth and a series of sanctions announced by EU on Russia. Investors always consider Germany as the economic engine of the Europe and if things are not rosy there, then the matters in other parts of the region where political uncertainty, no structural reforms, have been announced cannot look glooming. The CAC 40 is the perfect example of the above argument which closed in a negative territory for this quarter. The leader of the country is still pleading the ECB president to do more and announce more growth friendly policies but given that the amount of stimulus we have received so far this year from the ECB, it is highly likely that we may not see a day this year when we will hear the word of full blown quantitative easing.
In terms of companies, we have revived earning results from Sainsbury(J) (LONDON:SBRY) this morning. The company is desperately trying to hold the tide. It obviously cannot compete with the two biggest giants in the market when it comes to slashing the prices, and yes, we are talking about Aldi and Lidl, which controls half of the market share now. Nevertheless, I certainly applaud the results because the overall drop in earnings was not as big as expected. Sainsbury is still in a process of slashing the prices and trying to match their prices to Asda which is positive step, but this area has become fiercely competitive and it is extremely difficult to win by competing only by cutting their price because this the space is covered by German stores who are doing the best job ever.
The news of further investigation by the FCA for Tesco (LONDON:TSCO) is another set of bad news for the company. Obviously not many will like to tip their toe in this stock when they do not even know the size and scope of this investigation which is taking place by the FCA- very negative news for the stock, again.
The economic docket is full today and we will kick start this with PMI data for Spain, Italy, France and Germany. Later in the day, we also have the PMI data for the UK after a strong GDP Q2 revision yesterday. As for the US, we have ISM manufacturing data due this afternoon which could provide us a little more detail for the upcoming US Non Farm payroll number on Friday.
Disclaimer: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.