Asian equity markets gave up early gains, ending the session mostly in the red after China’s latest read on industrial production disappointed, causing speculation that growth in the world’s second largest economy is decelerating. Chinese value-added industrial output for August was up 6% from the previous year, dropping from the 6.4% July reading, and well off expectations for a 6.6% reading. The news caused equities and commodity prices to fall after being flat for most of the day.
European markets had a choppy session, flipping between gains and losses before finishing mixed. The day started off with sentiment muted after China reported weaker than expected industrial production data overnight, causing worries about the strength of the world’s second largest economy. This caused significant losses for the mining sector, which has been a market leader lately. Investor risk appetite was dented further as the Bank of England kept rates on hold, but indicated that rate hikes for the U.K. are just over the horizon. The news also caused the Pound to spike higher, sending London’s FTSE sharply lower as investors priced in the increased probability of a rate hike.
U.S. markets ended the day mixed on Thursday as risk appetite from investors took a break. The Dow was still able to climb to a new record close however, helped by gains from the industrial sector. The Nasdaq underperformed as technology shares were decidedly weaker. In economic news the U.S. reported stronger than expected consumer price inflation, which also weighed on equities as it left the prospects for a Federal Reserve interest rate hike later this year little changed. The consumer discretionary and consumer staples sectors performed poorly following the report as well, dragging on the S&P500.
FOREX
EUR/USD
For the most part this pair remained fairly range bound on Thursday, trading between 1.1870 and 1.1920 throughout the session. There was a huge spike to the 1.1836 level at the open of North American markets, but this quickly cleared and the pair came back to its starting level. The afternoon saw a steady move higher for the pair as the USD weakened broadly against rival currencies.
GBP/USD
This pair continues to show extreme volatility, and Thursday was no different, with the pair beginning the day by heading lower, but then rocketing higher in response to the Bank of England monetary policy statement. While the BoE kept monetary policy unchanged at this time, they also said that markets should prepare for higher U.K. interest rates sooner rather than later. After gaining roughly 170 pips for the day the pair ended at a more than 14-month high.
Cryptocurrencies
The cryptocurrency market suffered a severe blow on Thursday, with some of the minor alt-coins losing as much as 60%, while major players such as Bitcoin and Ethereum were down in excess of 20%. The selloff began early in the day after a Chinese cryptocurrency exchange said it would be closing on September 30. This renewed rumors of cryptocurrencies being banned in China, despite the fact that there has been no official announcement from the Chinese government. The market stabilized Thursday afternoon in North America, but by the evening was back at its session lows and heading lower still.
Commodities
Metals
Precious metals halted their slide on Thursday, with gold gaining for the first time in four sessions, although the rise was muted when U.S. consumer inflation was reported as hotter than expected. The somewhat muted risk sentiment in markets helped the metals halt their slide, but the downtrend is likely to resume without any outside catalyst.
Oil
Crude headed higher for the fourth consecutive session Thursday, but was unable to hold above the key psychological $50 a barrel level. Traders are increasingly bullish on crude as they see signs of recovery in the U.S. refineries and expectations for increasing demand. U.S. crude ended the day at a six week high, but there are some remaining concerns over high global production levels in crude.
Indices
S&P 500
The S&P edged lower on Thursday, with mixed sector performance as six of the eleven S&P sectors finished in positive territory. Losses from the consumer staples and consumer discretionary sectors combined with losses from the heavily represented financial and technology sectors to overshadow any gains, and risk appetite was low, leading the defensive utilities sectoutilityhe best performer on the day by far.
FTSE 100
London’s benchmark equity index was hit hard on Thursday by hints from the Bank of England that interest rate hikes could come much faster than markets are currently expecting. While the BoE kept interest rates and its quantitative easing program unchanged at this time, it also stated that if current economic conditions persist it will be necessary to “withdraw monetary stimulus over the coming months in order to return inflation sustainably to target.”
Stocks
Anglo American (LON:AAL) PLC
Shares of the world’s largest platinum producer continued lower Thursday in response to China’s slowing industrial production. The stock recently hit a 52-week high, but has been pulling back since last Friday as investors worry about global growth. The stock did have a nice run from just under 1,000p to just below 1,400p over the summer months, which means this pullback could be little more than profit taking in the stock. If that’s the case we believe it should bounce soon, and in fact it closed Thursday just above a good support level at 1,300p.