Stocks market are mixed as the fear surrounding a no-deal Brexit is doing the rounds.
Europe
Boris Johnson is planning to introduce new legislation which would stop any extension to the transition period, but that would leave open the possibility of a no-deal. The very mention of a no-deal Brexit is enough to rattle some traders, but the markets that have declined haven’t fallen that much, which suggests the fear has not gripped the entire market. Like yesterday, the soft pound has helped the FTSE 100 – it hit its highest since early August.
Pearson revealed plans to sell off its remaining 25% stake in Penguin Random House for £530 million. The shareholding will be bought by Bertelsmann. Pearson has been going through a protracted restructuring scheme as the asset disposal is the latest in a long line of spin-offs. The publishing industry has had to adapt to changing consumer habits, and that’s why Person is focusing on digital learning, but it is proving to be a slow process. The group’s CEO, John Fallon, who hatched the re-organisation scheme, is stepping down. Given the share price’s poor performance in recent years, few investors will be sad to see him go.
Fiat Chrysler and PSA, the owner of Peugeot, have agreed to pursue a 50:50 merger. Reports of the deal started to circulate in October, and now both parties are officially keen to tie the knot. The proposed merger is expected to deliver cost saving synergies of $3.7 billion. Should the deal get the green light from regulators, it will create one of the largest auto makers in the world. This is a classic example of middle of the firms teaming up to keep up with the changes in the industry. Global car sales are coming under pressure on account of weaker consumer demand, and the rise of electric cars has been an issue for the old guard too.
US
It’s Groundhog Day in the US as the S&P 500 has racked up yet another all-time. The news from last week that the US and China reached phase one of the trade deal has been driving along bullish sentiment.
FedEx shares have sold-off on the back of largely disappointing figures. Second-quarter EPS were $2.51, which undershot the $2.76 forecast. Revenue slipped to $17.3 billion, and the consensus estimate was $17.58 billion. The group lowered its full-year EPS outlook to $10.25-$11.50 from $11-$13. Keep in mind, equity analysts were expecting $12.03. The delivery company blamed cooler economic conditions as well as the break with Amazon for the poor update.
General Mills revealed largely positive quarterly figures. EPS were 95 cents, topping the 88 cents forecast. Adjusted gross margins rose by 80 basis points to 35.3%. The sales numbers were respectable, but failed to meet forecasts. Net sales nudged higher to $4.42 billion, but traders were expediting $4.43 billion.
FX
GBP/USD has taken another knock on account of the fears about a no-deal Brexit after the transition period. Traders have traditionally been rattled by the prospect of the UK leaving the EU a deal in place, but that possibility might not be for one year. The negative move in sterling is partially driven by profit taking too as the pound has rallied against the US dollar since early September.
USD/CAD took a knock in the wake of the Canadian inflation data. The CPI rate jumped from 1.9% to 2.2%, meeting forecasts. The CPI rate hit its highest level since May, which suggests that demand is on the rise, but keep in mind the core CPI rate held steady at 1.9%. The US dollar has been a little soft recent, and it has been in decline against the Canadian dollar for over two weeks.
Commodities
Gold is slightly higher today but volatility remains low. The metal’s upward move is all the more impressive given the US dollar’s positive move, and not to mention the continued bullish run in equities. The S&P 500 hit yet another record-high, so demand for the metal is robust as typically gold falls when stocks rally.
The oil market has been muted today, and the Energy Information Administration report was broadly in line with forecasts so traders had little to get excited about. Oil inventories declined by 1.08 million barrels, while the consensus estimate was for a draw of 1.28 million barrels. Gasoline stockpiles grew by 2.52 million barrels, and the forecast was for 2.17 million barrels.
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