European markets were in rude health this morning, but now they have handed back their gains, and the FTSE 100 is now in the red. 

Europe

The fact that markets ran out of steam near lunchtime suggests that traders are a little uncertain about the bounce back. Oil and gas stocks, like BP and Royal Dutch Shell are weighing on the FTSE 100.

The BoE kept interest rates and the stimulus package on hold, meeting expecting. There were a few alterations to forecasts, but overall the outlook hasn’t changed a lot. The growth outlook for 2018 and 2019 were trimmed slightly, the CPI outlook was nudged lower, and the yearly wage outlook was increased slightly.

Royal Dutch Shell shares are in the red after the company posted a 40% rise in net profit to $5.6 billion, but equity analysts were expecting $5.7 billion. The upstream business was the standout performer, as profit jumped by 235%, and the integrated gas division saw earnings rise by 78%. The downstream unit registered a 24.6% drop in earnings. The oil titan confirmed that the first phase of the share buyback scheme has been completed, and the second stage of the process began today. The cash flow from operating activity jumped by 59%, and that helped the company keep the dividend unchanged at 47 cents. The firm had as solid performance, but traders had high hopes given BP’s results earlier this week, and the rally in oil throughout 2018.

BT shares pushed higher today after the group announced a solid set of first-half figures. Earnings jumped by 24% on a year-on-year basis, and the group confirmed that full-year earnings wold be at the upper end of its £7.3 billion - £7.4 billion range. Costs were trimmed by 3% as the company is embarking on an aggressive cost cutting scheme. 2,000 jobs have been cut since May, and when the programme is completed, 13,000 jobs will have been affected. Traders welcomed the rewards from the turnaround plan. The stock gapped higher this morning, and if the positive move continues it could target 278p.

Just Eat had had a strong third-quarter as revenue soared by 41%. UK orders rose by 16% and the company confirmed that over half of the orders were made via the app. The possibility of a tie up between Uber and Deliveroo has prompted the company to up its investment in the business particularly in Latin America. The firm said it expects full-year revenue to beat the top end of forecasts, while the profit will be at the lower end – due to capital expenditure. The stock was jolted higher today, and if the positive move continues it could target 735p.  

US

Stock indices are higher after President Trump said he had a ‘long and very good’ chat with China’s President, Xi Jinping, and the two discussed trade. The leaders will meet face to face at the G-20 summit in Argentina later this month, and dealers are a little more optimistic about the trading relationship now.

Apple will report their fourth-quarter numbers after the closing bell. The third-quarter performance will be a tough act to follow seeing as they were the strongest numbers for that time period. The announcement will give us an update on the new iPhone XR and the new Watch, and how well they are selling. Tech stocks like Amazon and Alphabet saw major volatility after the respective results were released, so traders will half expecting a bumpy rise.

The jobless claims report came in at 214,000, which was slightly above the 213,000 expected. Last week’s figure was revised higher to 216,000 from 215,000. Keep in mind we saw a strong ADP employment report yesterday. Tomorrow the non-farm payrolls report will be released, and traders will be paying close attention to the full report, in particular the wages component.

The ISM manufacturing report dipped to 57.7 in October, from 59.8 in September. It was the weakest reading in 5 months. Within the update, the new order component dropped to its lowest level since April 2017, but the prices paid constituent ticked up. Higher prices and softer demand is a worrying combination.

FX

GBP/USD had a stellar session as they was plenty of news circulating today. Earlier in the day traders were focused on an article in The Times that claimed the UK and the EU had reached a tentative deal regarding financial services. Since then, a government official claimed the report was ‘unsubstantiated’. The fact that the individual didn’t completely dismiss the report suggests there is some truth to the article. The mixed update from the Bank of England regarding growth, inflation and wages forecasts didn’t dissuade the bulls.  

EUR/USD has been given a boost by the broad based sell-off in the US dollar. The greenback has pulled back from a 16 month high, and traders are cashing in their positions. It is possible some dealers are squaring up their books ahead of the US jobs report tomorrow.

Commodities

Gold has rallied on the back of the sharp drop-off in the US dollar. The metal continues to have a strong inverse relationship with the greenback. The commodity has been broadly moving higher since mid-August, and a break above the $1,244 mark could bring $1,265 into play.

Oil is in the red as output is high and traders are worried about global demand. US oil production has topped 11 million barrels per day, and Russian supply is at its highest level since the Soviet Union, and this added to the agreement that supply is high. At the same time, concerns about global growth persist, and dealers are worried about future demand.

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