Stock markets in Europe are largely in the red this afternoon as the feelgood factor from the Brexit delay has been replaced by the caution of a possible general election in the UK.
Europe
The mood was lifted yesterday when the EU supported a request to grant the UK an extension of up to three months. Today the chatter of an election is heating up. Elections can be risky as Mrs May found out in 2017. The Conservatives are polling well ahead of the Labour Party but traders have learned not to rely on opinion polls given the events of the past three years, hence why equities are down.
BPshares are lower today after the group posted a 41% fall in third-quarter underlying replacement cost profit – a popular metric to gauge profitability of oil companies. Falling oil prices as well as well as one-off costs were cited for the plunge in earnings. Hurricane Barry had a ‘significant’ impact on the group’s oil production in the Gulf of Mexico over the summer. One year ago, BP ploughed over $10 billion in shale assets previously owned by BHP Billiton, but since then, oil prices dropped more than 17%, so the timing wasn’t great. The outlook for the oil titan isn’t rosy given the various downgrades to global growth forecast plus oil demand predictions. BP are known to have shelled out a colossal amount for shale assets, and now the underlying oil market is subdued so that is likely to hang over the stock.
Sticking with the energy sector, Hunting warned that annual core profit will be at the lower end of expectations. The oil services firm cited a slowdown in US onshore drilling for the decline in guidance. The group didn’t go into any detail, but confirmed that third-quarter earnings dropped when compared with the two previous quarters, plus the outlook for the fourth-quarter isn’t too upbeat either.
Royal Mail Group shares took a knock after they were downgraded to underweight from neutral by JPMorgan Chase. The Wall Street bank cut their price target to 192p from 252p.
US
The S&P 500 hit another record intra-day as traders are still optimistic in relation to the US-China situation. Yesterday we heard from President Trump that he hopes to sign phase one of the trade agreement next month. The hopeful mood in relation to China has overshadowed the mixed data. The Conference Board consumer confidence report dropped to a 125.9 a seven month low. Pending home sales increased by 1.5% in September. The consumer confidence reading could be a sign the tariffs on Chinese imports are impacting consumers.
Beyond Meat posted healthy quarterly figures, but the stock sold-off aggressively as the group confirmed it needed to offer more discounts in order to fend off competitors. Third-quarter EPS was six cents, which smashed the three cents forecast. Revenue for the period was $92 million, slightly above forecasts. The group even raised its guidance too. The fact the group talked about offering more discounts spooked traders as price wars usually only benefit the consumers, while the shareholders usually suffer.
Google’s owner Alphabet, revealed largely positive figures last night. EPS came in at $10.12, but traders were expecting $12.42. Revenue for the period was $40.5 billion – narrowly ahead of forecasts. Google’s revenues jumped by 17% in the three month period when compared with the same quarter last year. On an annual basis, paid clicks on Google properties increased by 18%, while cost-per-click dropped by 2%, so it was a win-win for the tech giant.
FX
GBP/USD has been subdued today amid the noise from UK politics. MPs voted in favour of amending the election bill, but there is no guarantee that an election will be held in December. Major amendments to the bill such as allowing 16 and 17 years the vote, as well as EU nations in general elections, might cause the bill to be scrapped. Last month, UK mortgage lending was £3.84 billion, which was in line with forecasts. The August report was revised down to £3.7 billion from £3.85 billion. The number of mortgages approved was 65,191, which was a slight improvement on the August reading, so demand is clearly holding-up.
EUR/USDhas also seen low volatility as there were no major economic announcements from the eurozone today. The single currency has been pushed around by the greenback today. The single currency has been in an upward trend since the start of the month, and while it holds above the 50-day moving average at 1.1035, the bullish trend is likely to continue.
Gold is in the red again as dealers are in risk-on mode. The S&P 500 hit a fresh intra-day all-time high, so it is clear that traders are keen to take on more risk. The metal is drifting lower, and while it holds below the $1,500 mark it is could rack up further losses. A break below $1,473 might put the $1,460 area on the radar.
WTI and Brent Crude are lower today as traders are fearful the US oil inventories will show a build. The American Petroleum Institute report will be posted at 8.30pm (UK time), and dealers are expecting a build of 700,000 barrels. Oil hit a three week high yesterday, so some traders are keen to square up their position ahead of the report.
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