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Banks banking profits. Tesla shares to leave bears in the dust

Stock markets are going through a period of churn as investors digest a slew of corporate results. The FTSE 100, like the other main European indices was slightly lower, bond yields nudged higher, the pound was lower before UK GDP data and Brent crude oil remains under $50 per barrel.

In Germany, shares of Deutsche Bank were leading the charge after the troubled lender posted a surprise profit in the third quarter. Revenues rose over the same period last year thanks to a 10% rise at its investment banking business. The results are especially welcome since a lot of the trouble surrounding the bank has focused on its inability to produce the profits necessary to pay its litigation costs. Litigation costs for DB were reduced in the quarter, bolstering the numbers. However the US Department of Justice will make sure that’s not the case in the following quarters.

Barclays earnings in the third quarter were boosted by its investment banking business, mirroring a trend seen amongst the big American banks. The £600m provision for more payouts over the PPI scandal and future MBS mis-selling fines in the US continue to overhang profitability at the bank.

The acquisition of EE has boosted revenues at BT, helping send shares higher on Thursday. Revenues were still higher, even stripping out the addition from EE. All the signs are that there has been no real fallout from the chance of a BT-Openreach breakup on profitability.

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Another Brexit corporate winner has emerged in the form of GlaxoSmithKline. GSK has said it can withstand the prospect of US price pressures under a Clinton presidency thanks to the drop in Sterling boosting its foreign earnings. Hillary Clinton’s apparent determination to crackdown on “price gauging” in the healthcare industry is a big headwind to pharma profits. As a UK firm benefiting from a lower pound, GSK could weather the storm.

US stocks look set for a soft start with the Dow Jones looking at a single-digit decline as well received results from Tesla are offset by risk-off sentiment in Asia and Europe. Thursday will see a tech earnings onslaught with Twitter, Alphabet and Amazon all reporting Q3 results.

Shares of Tesla are expected to pop on the open after the electronic-carmaker reported a surprise profit in the third quarter. The market is reacting to a strong headline beat, but under the hood there are some issues that could make the gains unsustainable. Revenues narrowly missed expectations, profits were artificially lifted by Zero Emission Vehicle (ZEV) credit sales  and Tesla’s car production guidance for Q4 means it will miss full-year targets for a third time.

USA pre-opening levels

S&P 500: 2 points lower at 2,137

Dow Jones: 6 points lower at 18,193

Nasdaq 100: 7 points lower at 4,853


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