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European stocks slip after weak Asia lead

There’s been a more negative tone for European markets today after the solid session from yesterday, with the weakness in Asia markets weighing on overall risk sentiment.


A Moody’s downgrade to the credit outlook of China, along with weak November trade numbers suggests that the world’s second biggest economy is continuing to struggle, after imports slipped into negative territory.

Travel and leisure is weaker after JPMorgan downgraded the major airlines, dropping IAG to underweight, saying it preferred the low-cost carriers due to capacity constraints on pricing.

On the company earnings front it’s a busy day with packaging company DS Smith reporting an 18% decline in H1 revenues to £3.51bn and a 15% decline in profits before tax of £365m, sending the shares slightly lower. The company said that full year trading is in line with expectations. CEO Miles Roberts also announced he was intending to retire after 13 years with the company.

There hasn’t been much in the way of share price gains for the Balfour Beatty share price this year despite hitting their highest levels since June 2008 back in May.

In August, the shares took a tumble despite reporting a 9% rise in H1 revenue to £4.5bn, and an increase in underlying pre-tax profit to £97m. The weakness appeared to have been driven by concerns over the order book which declined again in Q2 and is now £1bn lower than it was at the end of last year at £16.4bn.

Today’s Q3 numbers have seen the construction giant report that they expect full year revenue to rise by 5%, driven by an increase in work at its Hong Kong business, as well as commercial real estate projects in Texas and Federal government work at Washington DC. The groups order book has been unaffected by the decision to scrap phase 2 of HS2. The order book for 2023 is now expected to be higher than the £16.4bn reported in H1, with profits for the full year expected to come in line with expectations.

Sports Direct owner Frasers Group has had a strong year share price wise, the shares back at the levels they were in November last year. Today’s H1 numbers have seen the retailer report a 4.4% rise in group revenue helped by a 130bps rise in retail gross margin to 41.8%. Adjusted profit before tax rose 12.6% to £303.8m, with management expressing confidence that they would be able to achieve full year adjusted profit before tax of between £500m and £550m. This would suggest that H2 is likely to be weaker than H1 even allowing for the fact that they have upped their investments in AO World, Currys, Boohoo and ASOS.

Part of the improvement in the revenue numbers was driven by a 124.3% increase in property revenue to £31.4m, as a result of the acquisitions of Luton and Dundee shopping centres and the Coventry Arena.  International retail also performed well with a 13.2% rise in revenue due to growth in Game Spain, and the acquisition of MySale business in Australia.

Games Workshop shares are getting (war) hammered despite reporting H1 trading that is in line with forecasts. Core revenue is expected to be not less than £235m with core operating profit of not less than £82m both solid improvements on the same period last year. The sell-off appears to be being driven by concern over a slowdown in its Q2 trading with brokers Jeffries expressing concern about that.

BT Group is also underperforming, slipping back on profit taking after 3 days of strong gains saw the shares hit 5-month highs yesterday.


US markets opened slightly higher despite the weakness being seen in Asia and European markets, as weekly jobless claims came in as expected around 220k.

Having seen the share price surge sharply over the past week or so due to options traders bidding up the shares with traders buying a load of cheap call options with $20 and above strike prices there was high expectations around GameStop’s Q3 earnings numbers yesterday. Unfortunately, they fell short of expectations with Q3 sales falling 9.1% to $1.08bn, well below forecasts of $1.18bn. All 3 of its business areas saw sales disappoint. Losses were slightly better than expected at 1c a share, due to lower expenses.

After the bell we have the latest numbers from Broadcom and DocuSign.

Broadcom shares have done very well this year, consistently making new record highs, coming to within touching distance of $1,000 a share back in November, after breaking above the previous record highs at $925 set in October. At its previous set of numbers Broadcom reported Q3 revenues of $8.88bn, while profits rose to $10.54c a share, with chip sales accounting for $6.94bn of that figure. For Q4 revenues are expected to be a record $9.27bn, pushing full year revenues to $35.8bn and profits of $42.13 a share. Semiconductor sales are forecast to rise to $27.79bn, up from $25.8bn in 2022.

DocuSign shares slipped below $40 a share at the end of October and the lowest levels since November 2018, as despite an improving revenue and profits outlook, the shares have struggled to convince. We’ve seen a modest rebound since then, however the shares have remained well below their September peaks of $53. In September when the company reported its Q2 numbers the shares fell sharply despite seeing an 11% increase in revenues to $687.7m, comfortably beating its Q1 guidance, with profits coming in at 72c a share. Just like they did in Q2, management upgraded their guidance projecting Q3 revenues of $687m to $691m, as well as raising their full year forecast to between $2.73bn and $2.74bn. Q3 profits are forecast to come in at 63c a share, up from 57c a share. 


The Japanese yen is the best performer pushing sharply higher on the back of comments from Bank of Japan governor Ueda, who said that the implementation of monetary policy was likely to get tougher from the year end and into next year. These comments have prompted some position paring ahead of a possible rates tweak at the next Bank of Japan rate meeting on the 19th December. BOJ Deputy Governor Himino also made comments that the era of negative rates may be closer to the end game than previously thought. The current BOJ rate is -0.1%. 


After 5 days of declines crude oil prices have tried to rebound off 5-month lows on speculation that continued weakness in prices could prompt a response from OPEC+ in an attempt to try and put a floor under prices. The sell-off seen over the last few days would appear to suggest that concerns are growing that the global economy is heading for a hard landing in the New Year, with the latest China trade numbers doing little to alleviate those concerns.


The price of sugar continues to nosedive, having tested 12-year highs only a couple of months ago. Wednesday’s trade saw the raw contract dip below 23 cents per pound for the first time since the summer, equating to a 15% fall in the underlying price over the last couple of weeks. Global production updates pointing at surpluses are driving the move with one day vol coming in at 84.43% against 39.46% for the month.

Cryptos continue to find favour with the prospect of ETFs being approved and broader institutional interest both lending support. It was the alt Dogecoin that was the standout in the asset class however with the meme-coin seeing modest gains before reverting as it celebrates its 10th anniversary. One day vol on Dogecoin stood at 134.03% against 81.95%, significantly ahead of the Bitcoin prints of 41.75% on the day and 38.17% on the month.

Yesterday’s ADP Payroll reading came in below forecasts and that appears to have rattled the outlook for a number of consumer stocks. CMC’s proprietary basket of outdoor living stocks started on a strong footing with gains of close on 3% being recorded in early trade, although by the close, upside had been eroded. One day vol on the basket printed 36.46% compared with 27.95% for the month.

And in terms of equity indices, downside pressure on many of the magnificent seven stocks took a toll on the NASDAQ on Wednesday, as it underperformed the likes of the DOW and S&P. One day vol on the tech heavy index stood at 15.48% against 13.11% for the month.

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