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FTSE 100 underperforms, Caterpillar slides

The FTSE 100 is lower on the day as the mining sector has weighed on the market. 


A sell-off in iron ore in China has hit mining stocks like Anglo American, BHP Billiton, and Rio Tinto hard, and that in turn has dented the UK equity index. Many of the eurozone indices are higher as we approach the close of trading as some traders have high hopes for a dovish update from the European Central Bank (ECB) tomorrow. The ECB might look to talk down the euro tomorrow as the Fed are tipped to cut rates next week.  

Deutsche Bank have been in the news for the wrong reasons recently, and today the struggling bank revealed even worse-than-expected numbers. The second-quarter loss was €3.15 billion, and traders were expecting €1.7 billion. Earlier this month the bank announced that it was cutting 18.000 jobs in a bid to slim down, and that included closing its global equities business, and reducing its bonds business too. In recent years, many banks have been getting back to basics, by trimming their exposure to the financial markets, and focusing more on lending and wealth management. The German finance house confirmed that in the second-quarter the private & commercial banking unit posted a loss of €241 million, while the asset management division made a profit of €90 million. Deutsche Bank’s troubles are likely to persist for some time, and the sooner it can get the restructuring under the way, the better.

Aston Martin shares have hit hard today by the company’s reduction in sales guidance. The car manufacturer previously predicted sales of between 7,100 and 7,300, and now it anticipates sales to be between 6,300 and 6,500, which equates to roughly an 11% cut in forecast. The wider auto sector has experienced some headwinds due to a cooling economy and because of global tensions, but when the top end of the industry lowers its guidance it suggest even the mega wealthy are reigning in their spending.

ITV shares are in demand today as the group confirmed advertising revenue dropped by 5%, but Credit Suisse were expecting a fall of 6%. The group has struggled with falling advertising revenues in recent years as traditional advertising budgets have been deployed differently, and the likes of Google and Facebook, have become more popular as an advertising platforms. ITV’s Love Island has proven popular with viewers, and there will be two series’ next year, and that should help with revenue a little. ITV needs to ramp up its advertising revenue from its online unit in order to try and buck the wider negative trend. The stock is marginally higher today, but the wider bearish trend is still intact, and if it continues it might target 100p.                                         


The major indices are mixed this afternoon as reporting season continues, but the hope the Federal Reserve will cut rates next week continues to do the rounds. Corporate stories have added some nice colour to the markets, but the hope of a dovish move from the Fed is the overriding theme.       

Caterpillar shares have sold-off today after the group posted second-quarter EPS of $2.83, which greatly undershot the $3.12 forecast. Revenue for the period was $14.43, which was essentially in-line with forecasts. The group has been losing ground in China in terms of sales, and it cited ‘higher material costs, including tariffs’ for today’s disappointing results. Caterpillar now predicts that full-year EPS will be at the bottom end of the previous guidance, which was $12.06 to $13.06, while analysts were pencilling in $12.24.       

Facebook’s CEO, Mark Zuckerberg, said we have a ‘responsibility to protest people’s privacy’ in relation to the Federal Trade Commission (FTC) ruling that the firm mishandled users personal information, which resulted in a $5 billion fine. The social media giant setup a new board committee that will focus on privacy, and Mr Zuckerberg will be required to make quarterly and annual reports to the FTC. The stock will report its latest quarterly numbers after the closing bell. 

Boeing shares are only a little lower today despite the company posting a quarterly loss of $5.82 – a record loss for the group. The group delivered 104 fewer aircrafts in the three month period, compared with the same time frame last year, and revenue slumped by 35%. The scandal surrounding the 737 Max aircraft was the reason behind the dreadful numbers. The stock has been fairly resilient considering what has gone one, and if this can’t cripple the share price, what will?  


GBP/USD has rallied as traders are getting used to the idea that Boris Johnson will be the next Prime Minister of the UK. Mr Johnson has made it clear he is willing to the take the UK out of the EU without a deal if an agreement can’t be reached with Brussels, and that put pressure on the pound in recent weeks, and now we are seeing a bounce back.

EUR/USD is a little low as the French and German manufacturing reports were poor. The German manufacturing PMI reading was 43.1, and the French manufacturing PMI update was 50.0. The underwhelming eurozone data was balanced out by the poor US manufacturing PMI update, as the reading was 50.0 – the lowest in 10 years.         


Gold has been given a lift by the softer US dollar. The inverse relationship between the greenback and the gold market continues to play out, and while it holds above the 1,400 mark, the bullish move is likely to continue.

Oil surged on the back of the Energy Information Administration report, which showed a drop in US oil inventories of 10.8 million barrels, while traders were only expecting a draw of only 4.01 million barrels. Gasoline inventories dropped by 226,000 too.      


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