It’s been a mixed day on European equity markets as the Brexit saga trundles on.
Europe
On Monday, the EU will meet to decide whether or not to grant the UK another extension in relation to exiting the EU. There is talk of a delay until early 2020, but it is understood the French government would prefer a shorter extension. It’s in all sides’ interest to grant the UK an extension, so traders are hoping for that outcome. Next week, we will find out if the UK will be having a general election or not as Boris Johnson has proposed going to the polls on 12 December, but Jeremy Corbyn will only support the move if Boris rules out the no-deal option – something he won’t do. Traders could be in for further political paralysis next week.
WPP seem to be turning a corner as the company saw quarterly revenue increase for the first time in over one year. Organic revenue less through costs including Kantar increased by 0.7%, while the consensus estimate was -0.6%. WPP have been hit in recent years by the pivot to modern mediums of advertising like Google plus Facebook. WPP reiterated their full-year guidance in regards to margin in addition to sales. The group has had to reorganise itself, and seeing as sales are growing again, it could be a sign the group is over the worst of its recent poor performance.
Barclays’ shares hit an 11 month high today on the back of a solid quarterly update. Pre-tax profit was £1.8 billion, while traders were expecting £1.5 billion. The bank outperformed on trading as the income from fixed income, currencies and commodities increased by 19% which is good by industry standards. Like RBS yesterday, Barclays made yet another provision for the mis-selling of PPI. This time the finance house set said £1.4 billion, but traders shrugged it off as it was in line with a previous forecast.
US
The major US indices are all showing gains as earnings season continues. Yesterday, we heard US vice president Pence say the US doesn’t want to decouple from China. The US politician called on China to end its ‘unfair’ trade policies, but overall the comments seemed to have been struck the right cord with traders.
The final reading of the University of Michigan consumer sentiment for October was 95.5, while the preliminary reading was 96. Keep in mind that US durable goods showed a decline of 1.1% yesterday. The Michigan report adds weight to the argument that consumer activity is cooling, and if that is the case, then the timing is poor as Christmas is on the horizon.
Amazon shares are in the red after the group’s third-quarter EPS came in at $4.23, which undershot the $4.62 forecast. Revenue for the period was $70 billion, which just shy of analysts’ expectations. The group’s cloud business, falls under Amazon Web Services, and that division posted $9 billion in sales, which was slightly below forecasts. The e-commerce giant is expecting fourth-quarter revenue to be $80-$86.5 billion, but traders were predicting $87.4 billion. The fact that Amazon’s guidance was below expectations suggests that we could be in for a slightly softer holiday shopping period.
FX
It has been a quiet day in terms of economic announcements from Europe. The German Ifo business climate remained at 94.6, slightly topping forecasts. Other than that, there were no other major economic updates from the Continent. A slight push higher in the US dollar index hit has put pressure on EUR/USD plus GBP/USD. The pound has held onto the bulk of the gains that it racked up in the past week. UK politics will remain in focus next week as traders will find out whether the EU grants the UK an extension or not. It is in everyone’s economic interest to avoid a no-deal, so a delay is likely to be approved.
Commodities
Gold snapped out of a period of low volatility. The metal hit a two-week high in addition it pushed back above its 50-day moving average. Should the positive move continue, it might retest the $1,520 level. The Federal Reserve will announce their interest rate decision next week. Chatter of a rate cut is likely to keep gold elevated
Oil prices have cooled a little in the wake of a positive week for the energy market. The Energy Information Administration report showed a decline in US oil as well as gasoline stockpiles. In addition to that, OPEC delegates have suggested that maintaining production curbs could be used to offset softer global demand. It seems that some traders are squaring up their books ahead the weekend.
