Buying from China after their week long holiday led most markets across Asia higher on Monday, although Hong Kong suffered losses as money flowed from the island back to the mainland. Bigger gains had been expected following last week’s 5% gains for Hong Kong’s Hang Seng, but weakness from property development stocks weighed on the market. Australia saw solid gains on the back of strength from the big four banks, while markets in Japan and South Korea were closed for a holiday.
European markets powered higher Monday, lifted by a rebound in Spanish stocks, and a stronger than expected reading on German industrial output. The Spanish rebound came in response to an anti-separatist rally in Barcelona that saw hundreds of thousands of people take to the streets to protest the secession movement in Catalonia. That protest gave investor’s confidence that no secession would actually take place. In Germany, industrial output grew 2.6% in August, handily beating expectations of 0.9% growth, and showing the German economy is growing strongly, despite a summer slump. London’s FTSE fell off a two-month high as the Pound regained some strength Monday.
U.S. equity markets ended modestly lower Monday as bond markets were closed for the Columbus Day holiday, leading to lower than normal trading volumes. With no economic reports out, there was little reason for investors to step up and buy. The Nasdaq snapped a nine session winning streak and all the major indices retreated from record territory. One contributing factor to losses for the Dow was a drop of 3.9% in shares of General Electric, which remains the worst performing of the Dow components. There is speculation that investors may be getting anxious ahead of earnings season, which could weigh on markets in the coming weeks.
The pair gapped higher at the open Monday after some tensions re-emerged between the U.S. and North Korea. There was little conviction to the move however, as traders then left the pair nearly unchanged throughout the entire session as it traded in a range of just 45 pips. At the end of the day it was back at its opening levels. And given recent action could remain trapped in the 1.1700 to 1.1800 range for some time.
After rising for eight consecutive sessions the pair broke its uptrend and dropped on Monday. Traders were reacting to news that U.K. Prime Minister Theresa May could reshuffle her cabinet, thus removing some of the friction that has surrounded Brexit negotiations. If this tone continues we could see the pair trading back below the 0.8800 level.
Bitcoin came back to life Monday, rising nearly 6% and trading above the $4,800 level at one point of the day. The gains for Bitcoin came at the expense of nearly every other cryptocurrency however, as the market saw a sea of red for coins both large and small. Ethereum moved back below the $300 handle, and Litecoin broke the support at the $50 level. There has been some speculation that traders are moving into Bitcoin in advance of the November hard fork in order to collect equal amounts of the new forks.
Precious metals gained Monday as traders worried about another flare-up in tensions between the U.S. and North Korea. The worries come following a weekend statement from Kim Jung Un, leader of North Korea, that the country’s nuclear program is a “treasured sword” that protects the country’s independence. U.S. President Donald Trump responded via Twitter that North Korea has violated all attempts at negotiations, and that “only one thing will work” when dealing with the rogue nation.
Crude gained on Monday after commentary from OPEC’s secretary-general that indicated the cartel is favoring extending production cuts throughout 2018. The secretary-general said that OPEC members are coming to a consensus that there is a global rebalancing of the oil market currently, and that OPEC may need to take additional measures in 2018 to facilitate that rebalancing.
The technology heavy index snapped a nine session winning streak on Monday as it gave back early gains and edged lower by the close. Technology was one of the strongest sectors of the day, but the weakness from other sectors, particularly health care, weighed enough on the index to send it into negative territory by the close. With earnings season approaching there is some hope that technology shares will again outperform, but investors have become more worried as the earnings season approaches.
The benchmark Spanish index was up as much as 1.2% intraday before settling with a 0.5% gain after hundreds of thousands of people took to the streets of Barcelona to protest the Catalonian separatist movement. Volatility on the index is likely to continue this week however, as Catalonian officials are still expected to announce independence for the northern Spanish state later this week.
The German investment bank has struggled throughout 2016 and 2017, unable to get above the $20 a share level as it has suffered from multiple legal entanglements and negative press headlines. Profits have been depressing for investors, and Monday saw the stock drop 2.2% as more negative news arose about the bank. The Wall Street Journal reported Monday that a rift has occurred at the bank due to CEO John Cryan avoiding meeting with HNA Group Co., a Chinese conglomerate that has built a nearly 10% stake in the bank. Investors worry that continued avoidance could lead to HNA dumping the stock, further depressing the stock’s price.