European stocks are surging into the close as global sentiment has turned positive. 

Europe

It is a broad based rally as dealers snap up relatively cheap stocks. The bargain hunters are having a field day as the doom and gloom surrounding equity markets has lifted. The macro and political outlook hasn’t changed, so some traders will be wondering how long this move might last. 

Standard Chartered shares are higher today after the bank posted a good jump in profits, and mentioned an ambitious restructuring plan. Third-quarter pre-tax profit increased by 37% on the year, but that was partially due to lower restructuring charges and a drop off in loan impairments. The firm had a strong performance in China, but the Middle East and African division underperformed. The finance house will reveal its restructuring plan in February, and it suggested there will be further job losses, and the aim is to ‘become a simpler, faster and more sustainably profitable bank’. The stock is higher today but the wider downtrend can’t be ignored, and while the stock is below the 50-day moving average at 600p, its outlook could be negative.

Airbus shares are higher today after the company announced earnings of €1.58 billion, which topped the €1.4 billion expected. The group announced that achieving its target of delivering 800 aircrafts by the end of the year has turned out to be a ‘greater stretch’ than initially thought. Airbus cited ‘internal industrial challenges’ and late engine availability as reasons for finding it tough to achieve its goal, but reaffirmed its full-year target. The stock has been in an upward trend for over two years, and if it holds above €90.00, its outlook should remain positive.

Next announced that third-quarter sales growth was 2%, and that hurt investor confidence as the company registered a 2.8% growth in the previous quarter. The online side of the business continues to perform well as revenue jumped by 13%, but the retail division continues to drag, as sales dropped 8%. Next maintained its full-year guidance, which is encouraging, but it wasn’t enough to entice buyers. 

US

The major indices are all showing gains as dealers swoop in and pick-up equities. The tech sector is the best performer, which is hardly a surprise given that industry took the brunt of the recent decline. There may not have been any new news, but sentiment has certainly has changed.

General Motors announced a solid set of third-quarter figures, and the stock rallied on the back of the announcement. Earnings per share (EPS) were $1.87, which easily topped the forecast of $1.25. Revenue ticked up 6% to $35.79 billion, and equity analysts were expecting $34.85 billion. The auto maker confirmed that fewer cars were sold, but average selling price rose.   

Facebook shares are higher after a mixed report last night. EPS comfortably topped forecasts, but revenue, daily active users, and monthly active users all missed forecasts. Average revenue per user was $6.09 – in line with equity analysts’ forecasts.

The ADP employment rate in October was 227,000, which topped the 189,000 that economists were expecting. The September report was revised lower to 218,000, from 230,000. When you take the two reports together, it paints a positive picture of the US jobs market. Investors will be looking ahead to the non-farm payrolls report on Friday.  

FX

EUR/USD is in the red on account of the firmer US dollar. The headline inflation rate ticked up from 2.1% from to 2.2% – meeting forecasts, and the core reading rose to 1.3% from 1.1%. The unemployment rate from the eurozone held steady at 8.1%. Overall the figures bode well for the currency bloc, but the concerns about the Italian budget are hanging over the currency too. If the single currency continues to lose ground, it could target 1.1300.

GBP/USD is higher today as Dominic Raab, Brexit secretary, claimed a deal will be reached by 21 November. Traders also feel the generous budget from ‘fiscal Phil’ – the Chancellor of the Exchequer, will boost the British economy and in turn could prompt the Bank of England (BoE) to hike rates sooner than expected. The BoE interest rate decision and inflation report tomorrow will be in focus.

Commodities

Gold is enduring another sell-off as the firmer US dollar earlier in the session hurt the commodity. This week, the metal has handed back the gains in made in the previous 2 weeks. The rebound in stocks around the world has also put pressure on gold as the metal attracted funds when investors were in risk-off mode.

Oil prices are a little higher for a change as the energy has endured a severe sell-off recently. The Energy Information Administration confirmed that US oil stockpiles grew by 3.21 million barrels, which was a little less than the 4.11 million barrel build that investors were anticipating. In the past four weeks, US oil stockpiles have increased in the region of 22 million barrels. Traders are a bit more chipper about the state of global affairs, and that is feeding into the oil market too.  

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