Apple shares drop after results; but Q4 will be the big de-cider

CMC Markets

Stocks retreated, bond yields were slightly higher and oil prices extended yesterday’s sharp losses in early trading on Wednesday.

Poorly-received results from Lloyds Banking Group and a slump in mining shares weighed on the FTSE 100, taking it back below 7000. Retail shares including Burberry, Tesco and J Sainsbury were top risers

Lloyds taking another big hit for PPI mis-selling has undermined what chief executive Antonio Horta-Osorio called a “robust performance.” The £1bn provision for more PPI payouts meant the bank saw a 15% drop in pre-tax profit in the 3rd quarter. Without one-off costs, underlying profits are down a more sanguine 3% y/y. The PPI hit is a frustrating delay to the beginnings of an earnings and dividend recovery at Lloyds.

In other banking news, Clydesdale is reportedly in discussions to buy Williams and Glyn from Royal Bank of Scotland. RBS shares were unmoved since the bank has already highlighted the technical difficulty of dividing Williams and Glyn and regular Lloyds customers, which use the same IT system.

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Shares of Vodafone were flat after it received a £4.6m fine from telecoms regulator Ofcom. It may be the biggest fine the regulator has ever levied but it won’t make much of a dent on Vodafone, which is forecast to make an operating profit of over £4bn this year.

US stocks look set for a lower open with Apple shares in focus after the iPhone-maker reported mixed third quarter results.

The headline-grabber is that annual sales declined for the first time in 15 years but that belies the optimism of behind Apple forecasting another return to sales growth in the final quarter. The iPhone 7 is a bigger upgrade than the 6S and the nightmare of exploding batteries at top rival Samsung should see Apple enjoy better Christmas sales than last year.

USA pre-opening levels

S&P 500: 2 points higher at 2,153

Dow Jones: 20 points higher at 18,243

Nasdaq 100: 11 points higher at 4,920


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