Stock markets in Europe are largely lower as investors remain nervous about the political standoff between Italy and the EU over the budget. 

The anti-establishment coalition in Rome wants to press ahead and boost spending, and in turn increase the budget deficit. Brussels has already rejected the proposal, and neither side want to back down. Fears persist that this could trigger another round of the eurozone debt crisis. The strained trading relationship between the US and China is souring sentiment too.   

Morrisons share are in the red after the company posted robust, sales figures, but they failed to live up to analysts’ expectations. The third-quarter underlying sales rose by 5.6%, while analysts were expecting a 6.1% rise. The supermarket posted a 6.3% jump in second-quarter underlying sales, so investors were also disappointed by the slowdown in growth. The warm weather during the summer, and the World Cup propelled sales higher, and so the last quarter was always going to be difficult to match. Today’s report represents the 12 consecutive quarter of sales growth. The group has made an impressive recovery in recent years, thanks to refurbished stores, improved customer service, and ventures with Ocado and Amazon. The stock has been in an upward trend since March, and if it can hold above the 200-day moving average at 243p, the bullish move might continue.

Direct Line said that gross written premiums declined by 5.8% in the third-quarter. The decline in policies are partially because of partnerships with Sainsbury’s and Nationwide came to an end.  The legislation has changed in the industry, and that has brought down premiums across the board. The firm’s CEO, Paul Geedes, said the group is performing well in a ‘competitive market’ and he is confident the company can achieve its 2018 and medium-term targets. The stock has been in decline for over one year, and if the negative move continues it could target the 300p mark.

Randgold Resources confirmed that third-quarter net profit jumped by 26% as a decline in production costs boosted earnings. Gold production for the three month period dropped by 1.5%, but the cost per ounce of production fell by 16%. The positive update comes just in time for the vote on whether the company should merge with Barrick Gold. Shareholders will make their decision tomorrow, and keep in mind that Barrick Gold shareholders backed the proposal.

US

Stocks are slightly higher as dealers await the midterm election results. There is speculation the Democrats will regain control of the House of Representatives, and the Republicans will hold on to their slim majority in the Senate. Should the Republicans retain control over both houses, it might open up the possibility of further tax cuts from President Trump, which might lift US stocks. Political pundits are predicting the results will be released between 12am and 6am GMT, but this is only an estimate.  

The Job Openings and Labour Turnover Survey showed that there were 7 million job openings in September, down from the record high of 7.29 million in August. The number has cooled a little, but the labour market is clearly robust.

FX

Uncertainty regarding US politics has put some pressure on the greenback. There is chatter that the Democrats will regain the House of Representatives and seeing as they are viewed as less pro-business, we might see the dollar dip, should the Democrats do well.

EUR/USD is higher on the session largely in part to the softer greenback. The eurozone revealed some mediocre service PMI reports this morning. The Italian report showed the sector contracted, while the German announcement showed the slowdown in growth.

GBP/USD has also benefitted from the slide in the greenback. The Brexit talks are heating up and Prime Minister May is confident a deal can be reached, but she is not willing to do it ‘at any cost’. Sterling is holding above the 1.3000 mark, but the pound might find it difficult to press ahead while the political uncertainty continues.

Commodities

Gold has given up its earlier gains as the US dollar is not as weak as I once was, and the move in the greenback, put pressure on the metal. Gold has been pushing higher since August, and while it holds above $1,214, its outlook should remain positive.

Oil has experienced low volatility today. The US introduced sanctions on Iran yesterday in a bid to put pressure on the country, but eight nations are exempt from the sanctions, so the move was not as severe as initially thought. Given the slowdown down in China and India, some traders are concerned demand for the energy might dwindle.

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