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Continued uncertainty over Italy along with geopolitical tensions have sent stocks tumbling. 

Europe

The EU Commission have rejected Italy’s budget proposal, and the administration in Rome will be required to resubmit their proposal in a number of weeks. Italy’s Prime Minister, Giuseppe Conte already stated there is no ‘plan B’. This has worried investors as they are afraid it could spark another round of the eurozone debt crisis. The US-China trade dispute rumbles on, and that is also playing into the sour sentiment. 

Whitbread revealed plans to launch a chain of no-frills hotels as a way of offering a cheaper alternative to its flag ship Premier Inn brand. Rooms at Zip hotels will start from £19, which is considerably cheaper than Premier Inn rooms, which start from £49. Zip rooms are much smaller, and you will have to pay extra for your room to be cleaned if you are staying more than one night. Airbnb disrupted the accommodation market, and now customers will be given even more choice. Zip hotels will rival easyHotels, but Whitbread already have years of experience in the hotel sector. The share price has been largely pushing higher for over two years, and if the bullish move continues, it might target 5,000p. 

Anglo American issued a mixed third-quarter production update. Copper production jumped by 17%, while diamond and iron ore output fell by 5% and 9% respectively. The group’s outlook was mediocre too, as the platinum production guidance was lifted, the diamond production output was kept unchanged, and palladium production guidance was trimmed. The share price has been edging lower since June, and while it remains below 1,700p – 200-day moving average, it should remain negative.

St James’s Place confirmed that assets under management (AuM) edged above £100 billion – an all-time high. Given the uncertainty in the financial markets, it is impressive the firm is still managing to attract new funds. The wealth manger confirmed it is confident it will achieve its medium-term goals.  The stock has been in decline since January, and if it holds below 1,000p, it might target 900p.

US

Equity markets are firmly in the red as the sell-off that has been in play has intensified. The poor political backdrop, along with mixed quarterly updates from companies has prompted traders to dump stocks. Equity market volatility dropped off last week, and now it seems that we are in for another round of selling.

Caterpillar revealed a solid set of third-quarter numbers, but concerns about rising costs in relation to tariffs weighed on the stock. Revenue jumped by 18% to $13.5 billion, topping forecasts. Net income per share was $2.88, while equity analysts were anticipating $2.72. The company even upped its guidance too, but traders latched on to the statement that ‘manufacturing costs were higher’. The fact that trade tensions between the US and China are still unresolved also hit the stock. 

3M shares are in the red after the company revealed a small decline in third-quarter revenue, which undershot market expectations. The group also lowered its full-year guidance. 3M cited the rally in the US dollar for the poor performance.

FX

GBP/USD has given up most of its earlier gains but is still higher on the session. Sterling slumped yesterday as traders were fearful about the Brexit developments, and there was talk about how long Theresa May had in her job. Those sentiments still persist, and are likely to hang over the pound.

EUR/USD hasn’t moved much today. Volatility was low as there were mixed economic updates from the eurozone. German PPI ticked up to 3.2% from 3.1%, while eurozone consumer confidence came in at -2.7, which was a slight improvement on September’s -2.9.

Commodities

Gold has hit its highest level since August as the slightly weaker US dollar and the flight to quality play has boosted demand for the metal. In recent months, the inverse relationship between gold and the US dollar has been strong, but more recently that relationship hasn’t been as strong, and the commodity is benefitting from the risk-off sentiment. If gold’s recent upward move continues it could target $1,266.

Oil is in the red after Saudi Arabia confirmed they will play a ‘constructive and responsible role’ in world energy markets. Traders are taking this as a sign that the Gulf state will not threaten to cut production. There is a lot of uncertainty in the oil market at the moment as investors are worried about the possibility of Saudi Arabia’s relations with the rest of the world deteriorating in light of the Jamal Khashoggi killing. 

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