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Earnings disappointment and outlook concerns weigh on markets

The prospect of higher rates for longer, along with earnings downgrades appears to be finally taking its toll on equity markets on both sides of the Atlantic, with another negative session for European markets with the DAX slipping back to the lows of the week, led by German automakers, with Mercedes-Benz leading the fallers, after a poor set of Q3 numbers. 


It is US markets that appear to be driving the negativity this week with the S&P500 and Nasdaq 100, both taking out key support levels as more and more questions get asked about relative valuations in big tech against the backdrop of a slowing global economy.

It’s been another disappointing day as far as UK bank results are concerned as Standard Charteredshares plunged to their lowest levels since March after reporting a -2.2% decline in adjusted pretax profit to $1.32bn in Q3. As with the other banks this week a lower-than-expected NIM of 1.63% which missed forecasts of 1.73% saw the shares drop 20% on the open, with the bank also taking a $294m impairment charge, which includes $186m related to China real estate. Loans and deposits also saw declines of 3% over the quarter. Competing with Standard Chartered for the wooden spoon award on the FTSE100 today is Rentokil which is also lower due to a weak read across from US sector peer Rollins.

Unilever shares are lower after reporting a 5.2% rise in Q3 underlying sales growth of €15 2bn, although volumes declined by 0.6%. The company kept its full year guidance of underlying full year sales growth of above 5% unchanged, while also announcing it would be selling Dollar Shave Club, although it would be retaining a 35% minority shareholding. Today’s losses appear to be based on concerns that we could see further underperformance as consumers become more price sensitive.

WPP shares have struggled today, slipping to their lowest levels since November 2020, after the advertising company cut its guidance for the second time this year, reducing full year like-for like revenue growth, from 1.5% to 3% to 0.5% to 1%.        


US markets have slipped back further with the Nasdaq 100 sliding to a new 5-month low as it takes out the key support level at 14,350. The move lower in the Nasdaq is being matched by the S&P500 which has also made fresh 5-month lows as it continues to slide further below its 200-day SMA.

A bumper US Q3 GDP number hasn’t offered much of a respite either, perhaps on the basis that most people think it’s been driven by one off factors, with personal consumption accounting for 4% of the economic expansion.

Initial reaction from Meta Platforms Q3 earnings last night was positive after Q3 revenues came in at the top end of forecasts at $34.15bn, and profits of $11.58bn or $4.63c a share, and Q4 revenue guidance was nudged up to between $36.5-40bn. Full year operating expenses were also revised lower to between $87-89bn giving the shares a lift after a 4% decline. However, these gains evaporated during the earnings call when Meta warned that the outlook for ad revenue was uncertain due to the deteriorating global economy.

Attention now turns to Amazon today and the cloud business after the slight miss from Alphabet earlier this week which saw their shares post their biggest one-day decline since March 2020. When Amazon reported in Q2 it raised its Q3 revenue guidance to $138bn to $143bn, which means today’s bar is high. Investors will be looking for revenue growth in both online stores as well as AWS which is expected to see revenues increase to $23.2bn.

Ford shares are in focus after the company agreed a 25% pay rise deal with the UAW union.


The Japanese yen has continued its slide against the US dollar, pushing to its lowest levels this year, with the market increasingly on intervention watch from the Bank of Japan who are also due to meet next week for their latest rate decision.

The euro has slipped back after the ECB kept rates on hold as expected, with Christine Lagarde saying that risks to growth were tilted to the downside, but also that inflation was still too high. There was no commitment either way as to whether the ECB was done on the rate hike front, however when looking at the economy you would have to think they probably are, and that rate cuts could start as soon as the middle of next year.

The US dollar got a lift after US Q3 GDP came in well above expectations at 4.9%, the biggest gain since 2021, with personal consumption contributing 4% to that number. Core PCE prices also slid back to 2.4% for Q3 giving the market the sort of goldilocks scenario that might give the Fed some pause for thought when it meets next week.


Reports of a brief Israeli incursion into Gaza initially kept oil prices underpinned in early trade and has acted as a reminder that the conflict between Hamas and Gaza could well move into a new stage imminently. That said, prices have slipped back today on the back of a stronger US dollar, as well as residual demand concerns which are serving to cap the upside.

Gold prices are treading water near to recent highs with the higher US dollar serving to act as a drag, even though yields have slipped back a touch.  


Aircraft manufacturer Boeing issued Q3 results yesterday, highlighting issues with suppliers and cutting targets for the number of 737s it plans to deliver this year. This is the latest in a run of disappointing corporate updates from the company although markets took some time to absorb the numbers. Initial gains were reversed, and the stock ended up only a little lower on the session, but one day vol printed 105.7% against 48.6% for the month.

Oil prices were on the increase again on Wednesday with Israel’s warning that the Gaza ground offensive was now imminent having been seen as supporting gains. Brent Crude retook the $90 mark having slipped lower earlier in the week amidst hopes that Israel was recalibrating its plans. One day vol on Brent advanced to 44.69% against 31.83% for the month.

The Australian Dollar had a turbulent day. Sentiment started upbeat after a modest overshoot in the inflation reading, but the delta here was relatively modest and considered opinion appears to be that this won’t materially impact the RBA’s next rate hike decision. As a result, Sterling went on to gain more than two cents against Aussie, driving one day vol to 8.66% against 7.1% on the month.

And price action for Bitcoin may have moderated but other cryptos remain active. Solana traded in a range exceeding 10% on Wednesday helped by reports of meaningful inflows for a 4th consecutive week, driving one day vol to 113.67% against 73.21% on the month.


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