market relief

European equity markets are in the red today as traders feel uneasy about being long going into the weekend in light on the sharp correction yesterday. 

Europe

The rapid move lower yesterday got traders thinking about how much markets have come in recent months, and that prompted some profit taking.

Vedanta resources had a solid start to the year as the turnaround in commodity markets helped the company register a 49% rise in revenue and a 37% increase in earnings for the first six-months. The interim dividend was rose by 20%, but Vedanta did so by raising its net debt position slightly.  Like all companies in the commodities sector, Vedanta suffered during the 2015/2016 slump, but the share price has made a robust recovery since then. The stock is down 0.9% today, but while it holds above its 200-day moving average at 792p, it market target 1000p.

Barrett Development is higher at on the day after HSBC raised its price target for the homebuilder to 774p. The share price is up 1% and is currently trading at 618p. Shares in Persimmon are higher on the higher on the day too.

US

US stocks are downbeat today as a mixture of the world-wide sell-off and disappointment in relation to the US proposals in putting pressure on stocks.  Donald Trump’s plans to overhaul the US system to make it more pro-business could be held up by the Senate. The upper house may seek to introduce the corporate tax cut from 35% to 20% in 2019. The setback has taken some of the wind out of the bull’s sails.

JC Penny shares are up 13% after the company revealed third-quarter figures which topped analysts’ expectations.  The company is still in loss making territory, but the negative earnings (EPS) was 33 cents, while the forecast was for loss of 43 cents per share. The total revenue and same-store sales numbers were well received too. The retail made a major effort to get rid of the stock it didn’t want or need, to free up cash and space ahead of the holiday season. The company’s turnaround process is still in place, but it still has a long away to go to really lift investor sentiment.

The US University of Michigan consumer sentiment survey for November came in at 97.8, down from 101.1 in September – dealers were anticipating a reading of 100.7. The slight slip in consumer sentiment is slightly concerning as the unemployment and earnings figures since the summer have largely been positive.  

 

FX

GBP/USD was given a boost on the back of the robust British industrial and manufacturing output reports, which came in at 2.5% and 2.7% respectively. The growth rate was higher than economists’ expectations. The announcement spurred buying in sterling again as it has been trading within a tight range recently. The pound’s push higher since Mach is still in place, although it has been a bit lethargic lately.

EUR/USD is a touch higher due to some weakness in the US dollar on account of the US tax reforms being pushed back until 2019. The single currency has been losing round for the past two months and the mixed industrial production reports from the eurozone today didn’t give traders much of a reason to buy into the market. France’s industrial production report met analysts’ estimates, while Italy’s showed a considerable slowdown in the growth rate, and undershot forecasts.

 

Commodities

Gold has been standing still today, and which isn’t out of the ordinary seeing as the metal has been experiencing low volatility lately. The decline in global equities in the past two days only led to a relatively small move higher in gold, which is unusual as it normally attracts the risk-off money that is fleeing the equity markets.

WTI and Brent Crude oil are higher on the day as the shakeup in Saudi Arabia this week have left traders fearful that oil supply be curtailed. The power play the Saudi’s Crown Prince Mohammad bin Salman triggered buying as his as he has expressed views about extending the oil production cut.

At 6pm (UK time) the US will announce the Baker Hughes active rig count report, and last week the figure came in at 729.

 

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