Global Markets Overview – October 15, 2015

US equities remained choppy as investors juggled various factors, including a raft of key earnings. JP Morgan, Citigroup and Wells Fargo reported, with the dominant theme a pick-up in trading revenue. Earnings were mixed and didn't really give a good picture of what to expect from Q3 earnings. Earnings that enjoyed the biggest positive reaction were Citigroup and Intel. Intel reported after-market and impressed, resulting in a 2.8% rise in its shares.

Outside of equities, investors focused on the US dollar recovery, a rally in the VIX and another sharp drop for Brent Crude. Fed member Williams was on the wires, saying a later than 2015 lift-off would be justified if inflation doesn't pick up, going on to suggest he would be open to another round of asset purchases. We've heard some dovish members express concerns about inflation recently, but this is perhaps ultra-dovish as far as further asset purchases are concerned.

Greenback recovers as majors struggle

The US dollar managed to rise despite growing calls for the Fed to exercise caution on rates, given the risks from global growth concerns. After a few days of weakness, we were bound to see a recovery for the greenback. However, we've actually seen a pickup in demand for bonds, with the yield on 10-year treasuries dropping to 2.2%, the lowest since June 2013.

As a result, I feel the strength in the greenback can be mainly attributed to weakness in major peers such as the euro and the pound. This was a result of some disappointing economic readings out of Europe - CPI readings for the UK, France and Spain fell well short of expectations. Additionally, the German ZEW economic sentiment reading slipped into the red (the first negative print since November 2012), while industrial production for the region also contracted more sharply than expected.

EUR/USD dropped back below $1.2700, while cable tested $1.5900 for the first time since November 2013. The German government cut its economic outlook by a whopping 600 basis points to 1.8%. Such concerns may force Europe's powerhouse to yield on stimulus.

Strength in AUD/USD was short-lived and the pair swiftly dropped back to $0.8700 as the USD came back to life. Today's session will be fairly busy for the AUD, with Westpac consumer sentiment, new motor vehicle sales, China CPI and PPI data due out. This will keep the local currency busy and any disappointment could see it lose further ground.

ASX 200 to open lower

Ahead of the open, we're calling the ASX 200 down 0.2% at 5195. Traders will be keeping a close eye on iron ore names after yesterday's rally, which was mainly attributed to short covering. While this may be the case, perhaps this was enough to entice investors to start looking at these stocks again.

Rio Tinto's Q3 output report will grab most of the headlines, with iron ore output surging and remember the miner has already said it is looking to ramp up production. There will be a few AGMs to look out for, including CSL Limited, Dick Smith and Sirius Resources. Outside of the resources, it'll be interesting to see if the yield plays react positively to the moves seen in bond yields.

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