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European markets struggle as concerns about economic outlook abound

European markets have got off to a slow start to the day, with a rebound in oil prices giving the energy sector a modest lift, while bond yields have rebounded off the lows of yesterday.


The main focus of attention continues to be on next week’s central bank meetings of the Federal Reserve, ECB and Bank of England, and guidance on the likely glide path for rates heading into 2023. 

Packaging company DS Smith has seen its shares push to their highest levels since May after reporting H1 adjusted profits that beat estimates, although the gains proved fleeting. H1 revenues rose 51% to £4.3bn, helping to lift profits before tax to £315m, a rise of 80%. Despite a “challenging” outlook the company said that full year performance was likely to be ahead of expectations

British American Tobacco shares have slipped sharply after the company reiterated its full year guidance of 2% to 4% revenue growth, while also warning that US consumers were switching to cheaper brand cigarettes as the cost of living weighed on disposable incomes.

While the retail sector has faced a series of challenges this year, Frasers Group shares have held up reasonably well year to date. Today’s H1 numbers have seen the shares slip back sharply despite reporting a 12.7% rise in revenues to £2.64bn, and a 53% increase in reported profit before tax to £284.6m. This outperformance has been helped by the company’s continued acquisition of distressed assets like Missguided, with management saying that they were confident of meeting full year profit guidance of between £450m and £500m for the Group. Gross margins saw a modest fall to 42% from 44.7%.   

Balfour Beatty shares have retested their September highs after upgrading its profit expectations for the year. Its order book is expected to be around 5% ahead of the prior year, as is full year revenue. The company has continued to focus on higher margin work in the UK and the US realising £65m in profits in respect of the disposal of five assets. The company says it intends to buy back further shares next month ahead of full year results in March.

Unilever shares got a moderate lift on reports that the company was said to be considering a sale of its US ice cream brands. The lift proved temporary when it became clear any review probably wouldn’t include the Ben & Jerry’s brand. This is disappointing given that we’ve already seen that Unilever has already sold its Ben & Jerry’s business interests in Israel, so doing the same elsewhere would be a natural next step. The reality is that the Ben & Jerry’s approach and its political activism jars against the more conservative approach of Unilever management. It’s also not clear what Ben & Jerry’s brand adds to the Unilever ice cream offering. At their most recent trading update it was notable that ice cream sales were strong and that sales of its Magnum and Cornetto brands were driving those sales. In short Ben & Jerry’s offers management nothing but headaches, as well as potentially divisive PR, while offering very little to the bottom line.


US markets look set for a modestly positive open, after declining for the fifth successive day in a row. Weekly jobless claims look set to come in slightly higher at 230,000.

On the earnings front GameStop shares are set to be in focus after Q3 net sales came in below expectations at $1.19bn, while recording a net loss of $94.7m or $0.31 a share. The decline in sales was particularly worrisome given that we also saw it cash equivalents decline sharply as well. The company didn’t provide any guidance for Q4, and that it would be providing full refunds to customers who had been impacted by the collapse of its partnership with FTX. Fortunately, GameStop’s exposure appears to have been limited but the outlook doesn’t look promising for this previous meme stock darling.

Carvana shares are also in focus on reports that the company is looking at bankruptcy protection, as concerns rise that it might struggle to meet some of its near-term debt obligations.

Tesla shares are also likely to see some volatility, after the company announced it was introducing shortened shifts at its Shanghai factories, as well as delaying new staff hires, due to lower demand.     


The pound is underperforming today as the prospect of increasing industrial action undermines a UK economy that to all intents and purposes is probably already in recession, after a negative GDP print in Q3, and which will inevitably weigh on any recovery into 2023.     


Crude oil prices are seeing a modest rebound after hitting their lowest levels this year yesterday, over concern that a global economic slowdown would act as a significant drag on demand. The downside is likely to be limited due to anticipation that the US government will be looking to replenish the SPR


Hong Kong’s Hang Seng index struggled through Wednesday’s session, retreating in the wake of disappointing trade data and failing to find support off from that news of COVID restrictions being relaxed. Those losses may have proved to be short lived, but one day volatility printed 48% versus 38.48% for the month.

Crude oil continued its trajectory lower on Wednesday, with the Brent contract heading back towards levels not seen since the start of the year. Demand concerns continue to weigh, with one day vol coming in at 55.86% against 43.91% on the month.

CMC’s proprietary US banks basket remains an active trade. Analyst downgrades took a toll on some constituents, while downside pressures persist off the back of the gloomy economic outlook. One day vol on the contract was 41.15% versus 33.43% for the month.

And a turbulent day for Vodafone saw the company’s stock move in a 5% range through Wednesday’s session. The market appears to be finding little reassurance from the CEO’s departure, leaving one day vol to come in at 101.75% against 46.46% on the month.

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