Stock markets are in the red heading into the close as political uncertainty is weighing on sentiment.
The Italian government are due to send their revised budget proposal to the EU tomorrow, but it seems like the coalition in Rome are going to stick to their guns. Lega and the Five Star Movement were voted into power for many reasons, and jolting the economy out of its stagnant state was one of them. If the EU press too hard, they could risk sparking another round of the eurozne debt crisis. Prime Minister May continues to be boxed in, as members of her own party are deeply divided over Brexit, and she has Northern Ireland’s DUP to content with too.
Wood Group shares are in demand today after the company was awarded a new contract with a subsidiary of Abu Dhabi National Oil Company, and the deal is worth $53 million. The London-listed firm has a ‘strong foothold’ in the Middle East and the aim is to expand its business in the region. When oil hit a multi-year high in October, Wood Group shares hit its highest level since April 2017, but the share price has drifted lower since then, but if it holds above the 200-day moving average at 652p, its outlook should remain positive.
Rio Tinto confirmed it completed a $2.1 billion share buyback and finalised the sale of a bloc of land in Canada for $576 million. The mining company stated it plans to commence a $1.19 billion share buyback scheme in February 2019. Rio Tinto is keen to return funds to shareholders. The stock has been broadly moving lower since June, but if it holds above the 200-day moving average at 3,915p, it might push higher.
Diageo continue to sell-off non-core brands in a bid to focus more on premium products. The drinks company will dispose of a collection of brands such as Goldschlager schnapps and Seagrams whisky for $550 million. The firm will have a bigger drive for a small selection of higher-end brands, and funds will be returned to shareholders in the form of share buybacks.
Equities markets are in the red as traders are worried about the prospect of higher interest rates, along with the ongoing concerns about trade between the US and China. At the back end of last week, the Federal Reserve announced that more interest rate hikes are in the pipeline, and this continues to play on traders’ minds.
Apple are lower today after, Lumentum Holdings – which provides technology for the smart phone maker, slashed its revenue and earnings outlook after it confirmed that ‘one of its largest’ customers ‘materially’ reduced shipments. Lumentum didn’t state the name of the other company, but traders are drawing their own conclusions.
The US and China are set to meet later this month to discuss trade, but dealers remain nervous about the standoff.
The US dollar index has hit its highest level since June 2017 as the Federal Reserve’s hawkish comments last week have prompted demand for the greenback. The dollar is also benefitting from the safe haven play, as political uncertainty in Europe is making the US dollar more attractive.
EUR/USD is in the red as traders are nervous about the potential battle between Italy and the EU. Tomorrow, the Italian government will resubmit their budget to Brussels, but the antiestablishment parties are showing no signs of budging. The euro dropped to a 17 month low against the euro as dealers are squaring up their positions ahead of tomorrow. Italian industrial production slipped by 0.2% in September, and the update underlines the poor state of the Italian economy.
GBP/USD is lower again today due to uncertainty surrounding Brexit. A spokesperson for Theresa May stated that progress is being made in relation to negotiating with her own cabinet, and there is nothing to suggest that more ministers are on the verge of resigning. Some of the more pro-Brexit elements of the Tory party along with the DUP have made it clear they will vote against Mrs May plans if it prioritises the EU over the union between Northern Ireland and Great Britain.
Gold is lower on the back of the stronger US dollar. The metal has had a strong inverse relationship with the greenback in recent months, and it is no surprise that the multi-month high in the greenback has dented the metal. Gold has dropped to a one month low and a break below $1,200 could bring $1,180 into play.
Oil has rallied for a change after Saudi Arabia’s energy minister announced that OPEC and its partners might cut production by up to 1 million barrels per day in order to avoid over-supply. US stockpiles have been rising and US production recently hit a record high, and this contributed to the recent slump in the market. Major oil producers don’t want the energy to fall too far, so chatter of a production cut isn’t a surprise.
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