European and U.S. stocks closed lower

European and US stocks closed lower on Monday upon the speculation that the Fed will raise rates in December this year.

Britain's FTSE 100 closed down to 6288.95, while the German DAX ended with a fall of 1.6 % to 10,808.89.

Among the European companies, Aggreko plc, the leading provider of modular, mobile power and adjacent product solutions, reported a decline in sales for the third quarter, but also announced that has been commissioned to supply Guam Power Authority with a 40 MW power package in Guam for the next 12 months, which increased the price of the company's shares up by 3%.

The tires manufacturer of Continental raised its profit forecast for the end of the year after seeing sales increase for the third quarter, but the company's shares closed about 5.3 % down.

Shares of Lufthansa closed with more than 3 % down after the carrier canceled hundreds of flights Monday because of the ongoing strike of the crew.Across the Atlantic Ocean the S&P 500 finished the day with a fall of 1%, closing at a price of 2078.28, while Nasdaq dropped to 4,653.50.

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Bank of England keeps the bank rate at 0.5%

Interest rates in the UK will may at record low levels in 2016 and without a risk of an excessive inflation, says the published today quarterly inflation report from the Bank of England .

In September, twelve-month CPI inflation stood at-0.1%, slightly over 2 percentage points below the inflation target. Around four fifths of the deviation from the target reflects falls in energy,food and other imported goods prices, with the remainder reflecting subdueddomestic cost growth.  The combined weakness in domestic costs and imported goods prices is evident in subdued measures of core inflation, which are currently around 1%. 

The institution foresees the slowing of the global economy to balance consumer spending growth and productivity locally. Thus the consumer prices will remain under control and without increase in rates before spring in 2017. Apart, the high exchange rate of the pound also has a downward pressure on inflation, and it will take time before this effect lose power.

The outlook for global growth has weakened since the August Inflation Report.  Many emerging market economies have slowedmarkedly and the Committee has downgraded its assessment of their medium-termgrowth prospects.  While growth in advanced economies has continued and broadened, the Committee nonetheless expects the overall pace of UK-weighted global growth to be more modest than had been expected in August.  There remain downside risks to this outlook, including that of a more abrupt slowdown in emerging economies.

Regulators downgraded the forecast for economic growth in 2015 and 2016 respectively to 2.7% and 2.5%, while expectations for 2017 were revised upwards to 2.7%.

The MPC voted by a majority of 8-1 to maintain Bank Rate at 0.5%.  The Committee voted unanimously tomaintain the stock of purchased assets financed by the issuance of central bankreserves at £375 billion, and so to reinvest the £6.3 billion of cash flows associated with the redemption of the December 2015 gilt held in the Asset Purchase Facility.

According to the majority, price tension so far is not sufficient to justify an increase in interest rates.

US trade deficit declined in September to the lowest level in seven months

The US trade deficit declined by 15 percent in September to $ 40.8 billion against the forecasts for a more moderate decline of $ 48 billion to $ 42.7 billion. 

Exports increased by 1.6% to $ 187.9 billion, after the previous month reached a three-year minimum. At the same time imports decreased by 1.8 percent to a seven-month minimum of $ 228.7 billion, mainly due to lower costs for oil and manufactured abroad consumer goods such as mobile phones.

Despite the improvement in September, however, for the first nine months of the year exports remained 3.8% below the volume for the same period of 2014, while export companies are hampered by weaker demand overseas markets as well as from higher exchange rates of the dollar.

U.S. producers are facing export headwinds amid economic weakness in a number of major export markets. U.S. exports have also been hurt by the rising value of the dollar, which makes American goods more expensive on foreign markets.

The U.S. economy slowed to growth of just 1.5 percent in the July-September quarter, but analysts are looking for a rebound to around 2.5 percent in the current October-December period.

The Obama administration is preparing to unveil the text of a trade agreement it reached last month with Japan and nine other Pacific Rim nations, the next step in the administration's effort to win congressional approval for the Trans-Pacific Partnership deal.

USD at lower levels

USD remained at lower levels  against other major currencies on Monday after data showed that manufacturing activity in the US has increased by the slowest pace in more than two years.

PMI index fell to 50.1 from 50.2 in September, as the expected result  for October was of 50.0.

EUR/USD remained largely unchanged during the day and closed at 1.1015.

The data on Monday showed that the growth of the manufacturing sector in the euro zone rose in October, jumping to 52.3 in comparison with its level of 52.0 in September.

GBP/USD closed at 1.5414, while USD/CHF ended the day at 0.9867.

The British pound was supported during the day from data on manufacturing PMI, which posted the highest score of 55.5, compared with the previous month, when the index showed 51.8.

The dollar remained stable against the yen, USD/JPY closed the session at 120.74, while the Australian and New Zealand dollar closed the day respectively of 0.7145 and 0.6743.

At the same time, USD / CAD rose by 0.09% to 1.3092.

US dollar index fell to 96.92, as gold also closed lower at a price of 1133.28 dollars per ounce.

We should pay particular attention to the data on non-agricultural sector on Friday for further guidance on the likelihood of an increase in interest rates in December.

Manufacturing growth in Euroarea

Eurozone Markit manufacturing PMI data for October 2015, that was published today, showed an improvement. 

The indicator has gone to 52.3 points in October, which exceeded average expectations for a value of 52 points. For comparison - in September, its value amounted to 52 points.

A value above 50 indicates an improvement in the sector. Best result in the eurozone showed Germany. In the largest European economy PMI index amounted to 52.1 against expectations of 51.6 points and 52.3 points a month earlier.

Italy is another country where the result is significantly ahead of average market expectations. The index amounted to 54.1 points with expectations for 52.9.

In France, the value of the index is 50.6 points, or again below expectations of 50.7 points.

Spain also performed worse than expected with a value of 51.3 points with expectations for 51.9 points.

„The eurozone manufacturing recovery remains disappointingly insipid. The October survey is signalling factory output growth of only 2% per annum, a lacklustre performance given the amount of central bank stimulus in place”, said Chris Williamson, Chief Economist at Markit.

Bank of Japan downgraded its economic forecasts

At the Monetary Policy Meeting held on 30th October, the Bank of Japan abstained from further easing of monetary policy  and left its stimulus program unchanged. The institution, however, has cut its economic forecasts and postpone the deadline, when it’s expected to be reached the key inflation target, which strengthened the assumption that it is not ruled out expanding the incentives in one of the next meetings of the managing board.

The regulators already foresee the increase in gross domestic product for the fiscal year ending in March 2016, amounted to 1.2 percent, as previously estimated 1.7 percent. Inflation target of 2% is expected to be reached in the six months ending in March 2017, or about half a year later than former assessments.

Also series of economic reports were published that do not show much hope for recovery. Household spending unexpectedly declined by 0.4% yoy in predicted by analysts slowdown in growth from 2.9% to 1.2%. The basic annual inflation remained at minus 0.1%, more than the projected -0.2% but remains on negative territory. The unemployment rate was stable at 3.4%.