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European stock markets are lower again as the world-wide decline in equities rumbles on. 

Europe

Adding to the sell-off in eurozone stocks is the pop high in the euro. The single currency has had a good run in the past two days on account of the solid growth numbers from Germany yesterday, and the firmer inflation report from France today.

Mining stocks like Rio Tinto, Glencore, Vedanta, and BHP Billiton are in the red as metals like zinc, steel and nickel are weaker as fears that China is slowing down is weighing on investor sentiment. The latest, industrial production, fixed asset investment, retail sales and housing sales out of China point to an economy that is cooling.

TalkTalk shares are down 5.4% after the company swung to a first-half operating loss, and were cautious on the full-year outlook. The company posted an operating loss of £42 million for the first six months of the year, and that compared with an operating profit of £44 for the same period last year. The company also stated its full-year earnings would be at the lower-end of the forecast which is between £270 million and £300 million. The update saw the shares gap lower, and hit a level not seen since May.

Fenner announced a 14% increase in revenue, a 59% jump in operating profits and a 40% rise in dividend. The engineering company is back performing well because many of its customers are in the oil & gas and commodity sectors, and as their businesses have improved so has Fenner’s. The stock hit its highest level since August 2014 today, and if the bullish move continues it could hit 400p.

US

The Dow Jones and S&P 500 are lower on the day as US stocks are caught up in the global drop in stocks. The back and forth of the debate on US tax reforms proposals is also playing a role in the slide in equities. Investors are coming to the realisation that the changes may not be as pro-business that Mr Trump was originally pushing for.   

US headline inflation cooled to 2% from 2.2% on an annual basis – meeting expectations, but the core inflation level ticked up to 1.8% from 1.7%. This is an indication that US demand is actually growing.

Target had a solid-third-quarter, but the fourth-quarter outlook wasn’t as bullish as investors had hoped and in turn the stock is down 9.1%. Third-quarter earnings per share (EPS) came in at 91 cents, while the market was expecting 86 cents. The revenue for the period was $16.67 billion, and analysts’ expectations were $16.61 billion. Investors usually place a high importance on the guidance, and seeing as the fourth-quarter includes the holiday season, it was a big blow to the investor confidence when the outlook wasn’t as bullish as traders initially hoped.

FX

EUR/USD is higher on the day after France posted inflation data showed that the cost of living is picking up. Inflation in October rose to 1.2%, meeting expectations, and that compared with the September reading of 1.1%. The euro has been weak for the most of 2017, and it is finally showing signs of stimulating the French economy.

GBP/USD has a lot of volatility, but is largely trading flat on the day. Unemployment in the UK remained at 4.3%, while average earnings on a month-on-month basis has ticked up 2.2%, from 2.1% in September. The increase in US core inflation curbed some of the gains the pound was making against the US dollar, and now there is little change on the day.

 

Commodities

Gold was pushed lower by the higher than anticipated core inflation rate from the US. The metal was put under some pressure in light of the cost of living data, but the moved to the downside was relatively muted. The metal has been range bound lately and even though traders are in risk-off mode, the gold market isn’t really reacting to it.

WTI and Brent Crude oil is still higher on the day even though US oil and gasoline stockpiles came in well above markets expectations. US oil production climbed higher too.

US oil inventories rose by 1.85 million barrels, while traders were expecting to see a draw of 3 million barrels. Gasoline stockpiles increased by 0.89 million barrels, and the consensus was for a fall of 1 5 million barrels.  

 

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