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FTSE helped by commodity stocks, US retreats a little

The FTSE 100 is the best performer in Europe as the markets’ high proportion of mining and energy stocks has helped the equity benchmark.


The mood is positive today as the markets caught the tail end of the bullish move on Wall Street last night. 

Thomas Cook shares are in the red after the company announced that full-year profit dropped by 18.8% to £259 million. The market reaction was muted as the company issued a profit warning earlier this week – it’s second in two months. The unusually warm summer in Europe hurt the travel company as fewer people were lured to mainland Europe given continental climate the UK enjoyed. The airline division did surprisingly well as profit grew by £35 million, but the tour operator side of the business saw earnings fall by £88 million. The company cut prices to try and entice potential holiday makers, and that squeezed margins. The stock has been in decline since May, and if the downward trend continues it could target 30p.   

Lonmin posted a full-year profit of $68 million – its first annual profit since 2013. Revenue rose by 15% and the net cash position jumped by nearly 11%. Platinum prices have been falling for over five years and that is one of the reasons why the firm has had to scale back the size of their operation, and in turn greatly reduce the head count, and judging by today’s figures, the aggressive cost cutting has paid off.

Intu Properties shares slumped after a potential buyer for the company walked away from the retail estate firm. A consortium that included a Canadian and Saudi Arabian group, pulled their bid due to uncertainty surrounding Brexit. Intu has large exposure to retail parks, which have suffered recently due to the rise of online shopping, and the lack of clarity surrounding the UK’s planned exit from the EU is making matters worse. Intu’s stock has become considerably cheaper, but they might still struggle to find a prospective suitor given the poor retail and political climate. 

Deutsche Banks’ head office was raided by police officers as part of a probe relating to the ‘Panama Papers’ scandal. The German bank is suspected of assisting individuals help set up accounts in tax havens. The finance house has been struggling in recent years as a weak balance sheet has dogged the company, and now it reputation has been hurt again.


The major indices are a little lower today following the stellar session yesterday. Profit taking has set in and dealers reduce their exposure to the market. Traders are now a little less fearful about the prospect of series of rate hikes from the Fed, so today’s breather, might be the pullback before the next leg higher. 

We saw mixed data from the US today. The core PCE reading came in at 1.8% in October, and the September reading was revised down to 1.9% from 2%. The report is the Fed’s preferred measure of inflation, and slide in the reading indicates a slip in demand. The jobless claims rate ticked up to 234,000, from 224,000. There were some positive updates too, both personal income and consumption increased on the month. Overall, the figures were good, but not great.

At 7pm (UK time) the Federal Reserve will announce the minutes from the latest meeting. Given that we heard from Jerome Powell, the head of the Fed, yesterday, the announcement is likely to be a non-event.


GBP/USD is in the red as political uncertainty hangs over the pound. Yesterday sterling got an artificial rise on the back of the weak US dollar, and now the table have turned. Theresa May’s withdrawal agreement has little support, and dealers are afraid of an no-deal Brexit, especially in light of the Bank of England’s warning yesterday.

EUR/USD is a little higher today, partially because of mixed German data, and partially because of a dip in the greenback. Unemployment in Germany, dropped to 5% - a record low, but the CPI rate cooled to 2.2% from 2.4%.


Gold is up for a second day in a row as the softer US dollar and the possibility of fewer rate hikes from the Federal Reserve than originally expected has lifted the metal. The commodity has been range bound recently, and if it holds above the $1,200 mark, it outlook should remain positive.

Oil has bounced back today after Russia expressed desire to trim production along with OPEC. The oil cartel and it partners will meet next week, and there is speculation of a coordinated production cut, but traders will want to see that it is done across the board, and no-half measures, before they could become confident the slump is over.



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