Equity markets have suffered severe losses today as traders remain worried about the state of the global economy. 

Europe

In London, the energy sector plus the mining sector are nursing large losses on the back of the dismal manufacturing reports from major economies around the world this week. British banks in addition to insurance groups have been knocked by worries in relation to Brexit. Boris Johnson has proposed that Northern Ireland remain in regulatory alignment with the EU in relation to goods as well as agri business. The proposals from Prime Minister Johnson have been initially supported by the DUP, but there is still a way to go yet to get everyone onside. The prospect of a no-deal Brexit is weighing on financial stocks, as the Bank of England are likely to cut rates should that occur. Bank’s lending margins are usually squeezed in a lower interest rate environment, hence the declines across banks and insurers.    

Dave Lewis was drafted in to Tesco to turn it around, and now he feels that programme has been completed, he will be stepping down as CEO next year. Mr Lewis joined the supermarket group in 2014, when the company was reeling from a gruelling price war, in addition to an accounting scandal. The rise of Lidl plus Aldi damaged the big four supermarkets, and ‘drastic Dave’ embarked on a tough restructuring plan to steer the firm in the right direction. Stores were closed and jobs were lost, plus the group focused on its core markets. The group posted a respectable set of number this morning, which underlines the success of turnaround plan. Revenue was fractionally higher to £31.9 billion, while operating profit increased to £1.13 billion. The interim dividend was hiked by 58%, plus net debt was trimmed by 7.8%.  

Flutter Entertainment, formally Paddy Power Betfair, will buy Stars Group, which will create the largest gaming company in the world by revenue. Flutter will own roughly 55% of the new entity while Stars will own the remaining 45% stake. The move comes as regulation in markets like the UK as well as Australia is tightening, but on the other hand, the US is essentially being opened up to new business. The new combined company should help them expand further into the US as there are strength in numbers. 

The WTO concluded the US has the right to retaliate with tariffs with respect to Airbus. The trade dispute over tariffs was going on for 15 years, and today the international body found the US can levy $7.5 billion worth of tariffs annually over Airbus. The stock is slightly lower.  

US

Stocks are firmly in the red as fears about a recession have gripped the markets. The dreadful ISM manufacturing reading from yesterday is stilling playing on traders’ minds. The ADP report added to the worries the US economy is slowing down. In September, 135,000 jobs were added, while the August report was revised down to 157,000 from 195,000. The fact that both components of the update were underwhelming gave traders more reason to be worried about the health of the US economy. It is obviously great that jobs are being created, but the slowing of the growth rate could be an indication the economy is cooling.          

Johnson & Johnson shares are higher today after the company paid over $20 million to settle with two counties in the state of Ohio. The settlement will avoid a trail in relation to the nation’s opioid crisis. In the grand scheme of things, $20 million is small beer for a group like Johnson & Johnson, as a potential fine could be a lot worse.            

Lennar posted solid third-quarter figures as EPS came in at $1.59, comfortably topping the $1.32 forecast. Revenue rose by 3.3% to $5.86 billion, exceeding the $5.48 billion forecast. New orders jumped by 8.5%, while the group’s forecast was for an increase of 5.5%-7.6%. California is an important market for the group, the new orders figures were below average, which has caused for some concern for the company. There is a fear that wealthy Chinese investors are holding back on investments while the US-China trade spat is going on. The stock is up 1%.

 FX

For all the turmoil in the equity markets, it was been a quiet day on the currency markets. The US dollar index hasn’t moved that much. An absence of major economic news left traders with little to go on, so the trading ranges have been fairly small. GBP/USD is a little lower as traders are worried about Brexit. The suggestions put forward by Mr Johnson have been accepted by the DUP, but the situation is far from solved. EUR/USD has managed to pullback some ground from its recent loses.

Commodities

Gold had been pushed higher by the exodus from equities. Traders are in full-blown flight to quality mode, which has ramped up the gold market. The metal incurred losses recently, but today it is back in fashion as dealers dump stocks.  

WTI and Brent crude oil were already in decline today as traders are fearful of a global economic slowdown. The Energy Information Administration report made matters worse, as it showed that US oil stockpiles jumped by 3.1 million barrels, while traders were only expecting a build of 1.56 million barrels.          

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