Moves in equity markets were once again dominated by interest rate speculation and company earnings after the ECB left interest rates unchanged at their monthly meeting on Thursday. . There was some speculation the ECB may introduce further simulative measures on Thursday, in the end they dangled the carrot of possible further measures in the coming months,. Speculation now seems to centre on December being the month the ECB could add further measures.
This could make December an interesting month for rate announcements, as it’s the month Janet Yellen suggested the timing may be right, when the Fed failed to move in September, to raise rates for the fist time in over 80 months. One has to wonder if it is not pure coincidence that the month that the ECB may increase stimulus is now the month that the Federal Reserve could hike.
Despite the cheapness of money, the lack of spending by the consumer has been a concern. This week has seen some encouraging consumer data in the UK. On Tuesday Delloites consumer tracker reported that the UK consumer is more upbeat about their finances in the three months to September than at any time since their records began in 2011. On Thursday retail sales month on month in September climbed 1.9% against estimates of 0.3%. Year on year retail sales jumped 6.5% against expectations of 3.8%. This data may encourage a few of the monetary policy committee members to join Mr. Mcafferty to vote for a rate hike at their next meeting. An improvement in consumer spending can only be a good indication that the overall economy is picking up; it may also raise inflation expectations.
The earnings season picks up pace in the weeks ahead, however on Thursday several marking names reported. Demand for cheeseburgers remains high as MacDonald’s reported better than expected numbers. Caterpillar, supplier to the construction and mining industries, reported earnings and revenue below expectations and then lowered guidance for the year overall. We did suggest at the start of the week that the share price, which has been weak this year as the company continues to be affected by the weakness in both industries, might bounce as investors have anticipated this news. Despite the miss after an initial mark down the shares recovered during the day to finish up over 2%. Two other economic bell weather companies 3M Co and Dow Chemical helped boost the markets in the afternoon, in common with MacDonald’s their earnings came in above expectations. Microsoft in after hours trading hit a 15 year high and Amazon rose almost 10%, making it a good day for US tech and equities overall.