Stocks are lower heading into the close as trade tensions have increased. 

Europe

President Trump has threatened to slap ‘even higher tariffs’ on Chinse imports if an agreement is not reached. To add to the mix, the US Senate, passed a bill backing the human rights of the people in Hong Kong, and that has annoyed the Chinese government. The unrest in the financial hub has been widely reported, and it appears the US government are keen to see a return to normality to the region. Beijing views this as Washington DC sticking their nose into their business, and traders are bracing themselves for tough rhetoric from China, hence why equities are lower.   

Kingfisher shares sold-off after as the company confirmed that third-quarter like-for-like (LFL) sales fell by 3.7% ,and keep in mind that first-half LFL sales fell by 1.8%, so things are getting worse at the group. Continental Europe continues to lag the UK and Ireland division. The French unit is still a headache for the firm seeing as LFL sales in the three month period dropped by 6.1%. Screwfix, the wholesale side of the business, registered low sales growth, which is worrying because it has historically been a solid performer. The company blamed a dip in consumer sentiment in addition to a decline in promotional activity for the disappointing sales numbers.

2018 was a difficult year for Mitchells & Butler as the company warned on profit as well as halting the dividend The group has undergone a change in the business, which involved remodelling and converting sites. The frim revealed its full-year numbers today, and there was a 36% increase in pre-tax profit. LFL sales on an annual basis grew by 3.5%, and both the food and drink divisions performed well. The group appears to be turning a corner, hence why the stock hit a two-year high today.

United Utilities were helped by target-based incentives from the regulator, Ofwat, and the company expects to receive even higher rewards from the body in the year head. On top of the incentives from the government body, the firm kept an eye on costs. Revenue edged up by 2% in the first-half, while underlying operating profit jumped by 6.5%. Despite the positive update, the stock is slightly in the red.              

US

The slight nudge higher in trade tensions has encouraged dealers to cut their exposure to stocks. The Trump administration might look to include Hong Kong in the wider agreement with China. Whereby the US government might seek to include concessions from Beijing in relation to the Hong Kong unrest before finalising any trade deal.

Traders will be watching the Fed minutes later today. At the last meeting, the US central bank cut rates, meeting forecasts, but the message seemed to be that no more cuts were likely in the near-term.       

Targets shares have hit an all-time high after the company posted impressive third-quarter figures. EPS came in at $1.36, which smashed the $1.19 forecast. Revenue increased by 4.7% to $18.67 billion, while the consensus estimate was $18.49 billion. Same-stores-sales is a closely watched metric, and it was 4.5%, topping the 3.6% forecast. For the final quarter, the company expects same-store sales to increase by 3-4%.

Lowe’s issued a mixed set of third-quarter figures, but the stocks rose nonetheless. EPS was $1.41, topping the $1.35 consensus estimate. Revenue ticked up to $17.39 billion, but traders were expecting $17.68 billion. Total same-store-sales rose by 2.2%, but dealers were anticipating 3.1%. The US division saw same stores sales rise by 3%, but the business in Canada under performed.

FX

USD/CAD is higher as the dollar is largely higher across the board today. Headline as well as core CPI in Canada held steady at 1.9%. Levels of demand are clearly robust. As far as Western economies go, the Canadian one is in good health, although the latest jobs report was mixed.

There were no major economic indicators released from the UK today so GBP/USD has been low volatility. According to the headlines the debate between Boris Johnson and Jeremy Corbyn last night was a draw. The Conservative party have been comfortably ahead in the polls, but it would appear the two candidates are neck and neck. It’s the party that counts and that explains why sterling is still strong.  

Commodities

Gold is marginally lower as it is caught between a firmer US dollar and the risk-off sentiment of traders. A broad move higher in the US dollar has weighed on the asset as the inverse relationship between the two markets is holding it back. It says a lot about the weakness in the gold market when it can’t muster a rally when stocks are lower on account of trade woes.

Oil has been pushed higher by political tensions in the Middle East. It was reported that the Houthi movement downed a warplane belonging to the Saudi-led coalition. Traders are concerned about supply, especially in light of the drone attacks on Saudi’s oil facilities in September. The latest inventory EIA report showed that US oil and gasoline stockpiles grew by 1.37 million barrels and 1.75 million barrels respectively.      

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