European equity markets are set to finish the session in positive territory as the mood has improved greatly from the start of the week. 

Europe

Stocks were driving higher in the first few hours of trading but things have faded a little recently. The slightly negative beginning to the US trading session seems to have taken some of the wind out of the bull’s sails in Europe. Earlier today, the FTSE 100 was moving towards the 6,000 mark, but now it looks as if it will retest the 5,900 area. In London, airlines, hospitality, bank, and supermarkets stocks are all showing solid gains. Mining stocks like Antofagasta and Glencore are in the red because of the negative moves seen in metals.

Diploma shares have surged on the back of the news that it raised £190 million from a share placing. The funds will help with its planned takeover of Windy City Wire – the move will increase the company’s presence in the US. After the close of business yesterday, the proposed £357 million takeover was announced and the deal should complete in the middle of November. In today’s update, Diploma announced that it was paying a dividend of 30p. Traders reacted positively to the news as the cash pay-out and a takeover story project an optimistic image. The stock hit an all-time high today, so it certainly stands out for a London-listed company.

AA shares have sold off sharply after Platinum Equity Advisory revealed they are no longer interested in potentially bidding for the group. Last month it was reported that a number of companies were potential bidders for AA – Warburg Pincus, while Centrebridge Partners and Towerbrook Capital were acting together. When it comes to mergers and acquisition activity, there can often be a herd mentality, so now that Platinum Equity won’t be making a bid that could influence the other possible suitors. 

The sizeable sell-off in silver has dented the share price of Fresnillo, which is the largest silver miner in the world. 

PZ Cussons has had mixed fortunes because of the pandemic. The sale of some of its beauty products was disrupted – the issue is still impacting the group. The company saw a jump in demand for hand sanitiser and soap, so that has offset some of the negative impacts of the health crisis. Total revenue dipped by 2.4% to £587.2 million, while adjusted operating profit declined by 16% to £66.1 million. The firm registered a loss in Nigeria and the Australian business saw profits fall, so that contributed to the drop in group earnings. The final dividend was 5.8p. Trading in the first three months of the new financial year has been robust as sales rose by 23%.

Halma issued a trading update. The company announced that first quarter revenue is down 13% on the year – on an organic constant basis. Full year adjusted profit before tax in FY 2021 will be between 5% and 10% lower what was posted in FY 2020, according to the board of directors. The group is well positioned as it has more than £750 million in committed credit facilities. Paul Walker, the chairman, revealed his plans to retire and the company will look for a replacement.

US

The US tech sector has handed back some of the ground that it gained yesterday, and in turn that has impacted the mood across the board, hence why the S&P 500 is down over 0.4%. The flash services and manufacturing PMI reports for September were 54.6 and 53.5 respectively. The services reading for August was 55, and the manufacturing update was 53.1, so there wasn’t a huge change in activity. The updates suggest the economic recovery is still going well.

Loretta Mester, the President of the Cleveland Federal Reserve, said that accommodative monetary and fiscal policy was required to support the US economy. Traders will be listening out for commentary from Jerome Powell, the Fed chief, and other central bankers were are due to speak today.   

Nike shares are higher on the back of the strong first quarter numbers that were announced last night. The sportswear company saw a rebound in activity in China, where sales increased by 6%. In keeping with the time, the group posted a 28% increase in digital sales. Total revenue slipped by 0.6% to $10.59 billion, which was better than the $9.15 billion that equity analysts were expecting. EPS was 95 cents, and that easily topped the 47 cents forecast. North America is the group’s largest market, and sales declined by 2% to $4.23 billion, which exceeded the $3.39 billion consensus estimate. Nike issued a bullish outlook too as it expects full year revenue to increase by at least a high single digit percentage.

Walmart announced that it will hire more than 20,000 seasonal workers on the run up to the Thanksgiving to Christmas period. The workers will be deployed to the e-commerce division.

Johnson and Johnson announced that its potential vaccine for Covid-19 has entered the late stage of testing. The drug is the fourth product that is a part of the US government backed scheme to develop a vaccine for the coronavirus.  

FX

The US dollar hit its highest level since late July as its recent bullish run continues. At the beginning of the month, the greenback dropped to its lowest level in over two years. Recently it has tried unsuccessfully to snap out of the bearish trend that has been in place since May, but now that it has cleared the recent highs and set a multi-week high, this could be the beginning of the dollar’s turnaround.

EUR/USD is in the red on account of the dollar’s strength. The latest manufacturing and services data from France and Germany were mixed. The French services reading was 47.5, a four month low, and the manufacturing reading nudged up to 50.9. Germany’s manufacturing update increased to 56.6 – its highest level over two years, while the services reading was 49.1 – a three month low. The negative growth in the services sector of the largest two economies in the euro area does not bode well for the bloc.      

The CMC GBP index is up on the session. Sterling has declined in the past four days and today we are seeing a positive move. The UK flash manufacturing and services PMI report for September were 54.3 and 55.1 respectively. The readings cooled from the August levels, but they topped forecasts.       

Commodities

Gold is down on the day because of the aggressive move lower in silver, and the firmer dollar is playing a part too. Silver and gold tend to move in the same direction, and it seems the negative move in silver has dragged down gold. In the past week, gold has been moving lower and a break below $1,863 should pave the way for further losses.

WTI and Brent crude are higher on the session due to the fall in US oil and gasoline stockpiles. The Energy Information Administration report showed that US oil and gasoline stockpiles dropped by 1.63 million barrels and 4.02 million barrels respectively. The fall in inventories suggests that demand is higher.    


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