Stocks struggle as growth concerns weigh

Market Review

Yesterday’s market was relatively slow with the S&P contained within a tight range for more or less the entirety of the afternoon. The same was true for bonds, though major pairs against USD moved higher, although this was then retraced within a couple of hours. Data was mixed; with German manufacturing PMI numbers being posted close to contraction levels, while the below 50 reading in France was better than the expected numbers. In the afternoon the US reading posted a more or less in line number, while the Richmond Manufacturing Index was higher than consensus and the joint highest since February 2012. No strategy entries were obtained within the 5pm deadline, although both the S&P and Nasdaq entry points acted as support in the evenings.

Today's Fundamental View

This morning most markets have been in a tight range as there has not been any news of note. Yesterday’s dissapointed reaction by European and American stocks to Chinese data may show there is some continued negative pressure in the stock market which may continue for the next few sessions, before earnings season properly kicks off for the third quarter. Alcoa normally kicks off the earnings season, and the date for their next report is confirmed at 8th October. Should the performance earnings continue we may have a continued rally, though at this point the market is reacting less to macroeconomic news and data and we have a feeling of profit taking rather than long positioning; which will explain the markets reaction to the Chinese data. The session today will focus on the housing market, with New Home Sales expected at 1500BST at 432k. Although we feel housing has been relatively decent this year we have started slumping and building permits are again below 1 million, as is housing starts , whilst existing home sales slumped to just above the 5 million mark. Although there is not much happening in the markets, it is worth noting that the SEC is investigating Pimco ETF over pricing, and we can not help speculate as to what role Muhammed El-Erian quiting may have had in this case. The strategy today assumes a slow market, and as the recent equity sell off has been on the back of relatively little, we assume there may be some buyers entering the market.

Alternative View

Any geo-political risk should be carefully analysed, with continued focus on Ukraine as well as US data being a key catalyst for movement today. Monetary policy comments from the US will carry weight.