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UK stock market commentary (November 01, 2012): Tough times ahead for Our Dave

As November gets underway and we really turn into the winter months Our Dave knows that there are storms brewing for him ahead. Last night’s rebellion by his own MPs and the opportunistic vote against a rise in the EU budget by Labour has but the PM is a tricky position. He will have to go to the EU in a couple of weeks time and prevent a large increase in the budget, even fight for a cut or he’ll face further backlash back at home. Once again the issue of Europe is splitting the Tory party, but the issue serves again as a reminder than the opposition is just as split on the matter, having resided over years of above inflation increases. But most people will see that as there are cuts and austerity at home as well as across Europe being imposed on the periphery by paymaster Germany, there should also be restraint shown by the largely unaccountable overseeing institutions.

As if that isn’t going to be bad enough for Our Dave his best buddy George will then have to deliver a very important Autumn statement in December. There is at least something good to talk about following the better than expected GDP numbers but considering his track record there’s bound to be some sort of slip up or gaff. Rather like for many people in the City and the financial markets, the Coalition is probably desperate to see the end of 2012 and hope that 2013 will be a better year.

Yesterday as the Dow returned to normal trading there was a distinct lack of bulls around to lift the sodden markets. The index ended the session down only around 10 points taking it to the 13096 level and for now just about seems to be holding onto the 13000 mark. This is acting as quite a major support area for the index as it did at the end of August before a bounce to the 13600 area but a break below here could pave the way for further weakness.

Across this side of the Atlantic this morning the FTSE is improving slowly but surely since the open and is knocking on the door of 5800 at the time of writing, but this is hardly an indication of investors rushing back into the market following yesterday’s decline. One would usually expect investors to be happy to see the better than expected manufacturing data from China overnight but it seems not even this is enough to excite the market.

There are a couple of interesting pieces of data out today starting with the UK’s PMI manufacturing figures which are due to remain roughly where they were a month ago at 48.4, below the 50 expansion mark suggesting further contraction. Then at lunchtime there the US ADP employment data which can sometimes move the market and that’s expected to show a rise of 135k and after that we get the postponed US consumer confidence figures which are due to show a rise from 70.3 to 72.5.

The unemployment in the euro zone rose to a record 11.6% in September as tough austerity measures took their tolls especially on youth (23.3%). At the same time inflation was seen dropping from 2.6% to 2.5% last month. The shared currency gave back the early gains finishing unchanged around 1.2957 amid signs that Greece is in a worse situation than previously thought. This morning EUR/USD is a little lower at 1.2945.

A sigh of relief after returning back to life following the devastating Hurricane Sandy has attracted demand for precious metals as well as the whole commodities spectrum. It could also have been some bargain hunting as well considering gold’s retracement in the last month to near the $1700.00 mark. Anyway, the yellow metal jumped $10.5 to $1719.4, breaking above the 9 day moving averages.

As the US East Coast oil refineries resumed their activity following Hurricane Sandy, demand for crude oil increased. As a consequence, the WTI crude prices enjoyed a rise for the second straight session, gaining 29 cents to $85.97 a barrel. The US Department of Energy will release its weekly oil stockpiles report later today, estimated to indicate a build of $1.9 million barrels.