Equity markets in Europe are showing small gains heading into the close.

Europe

The US-China trade situation is still at the forefront of traders’ minds. The Sunday deadline in relation to the US tariffs on $150 billion worth of Chinese imports is looming, and the lack of clarity has brought about low volatility in stocks. When it comes to the trade saga, it’s the same old story – there is talk the planned tariffs will be deferred. It is possible the US might not slap on new levies, but in return they will be looking for Beijing to pledge to ramp up agricultural purchases.     

Inditex, the owner of Zara, posted solid figures. The company confirmed that net profit for the first nine-months increased by 12% on an annual basis. The firm said it is ‘enriching’ the customer experience as well as improving efficiency in the business through the use of technology. There is improved coordination in the entire process from design to distribution. Online sales initiatives are helping too. The clothing group expects like-for-like sales for 2019 will increase by 4-6%. The stock hit a 17 month high on the back of the news.  

JD Sports shares are in the red this afternoon after it was revealed that Pentland lowered its stake in the company. The group sold-off roughly 24 million shares in the retailer at 740p each, but it is still the majority shareholder in the fashion house. Ordinarily, when a major investor trims their position in a firm, traders get nervous, but keep in mind the stock hit a record high only last month. Despite today’s negative move, the stock is up 105% year-to-date, so it would appear that Pentland are locking in some profit.  

Stagecoach revealed an 8.8% fall in first-half pre-tax profit, while revenue dropped by over 20%. The poor numbers were not a major shock on account of having fewer travel franchises. The big news from the update was that Sir Brian Souter and Dame Ann Gloag – the founders of the firm, are stepping aside. Mr Souter will remain on the board of directors, and his deputy, Ray O’Toole, will take over the top job in January. 

US

The mood on Wall Street is muted as traders look ahead to the Fed interest rate decision. The US central bank are very unlikely to move interest rates, especially, in light of the fact that inflation is now 2.1% - while their target is 2%. It is the highest CPI reading in one year. The Fed are likely to say they are monitoring the data, which has been broadly positive recently. Seeing as we haven’t seen the effect of the three rate cuts that took place between June and October, the US central bank might drop hints that it will keep policy as is for a while. 

GameStop shares sold-off sharply as the company posted a quarterly loss per share of 49 cents, which shocked traders as the consensus estimate was for EPS of 11 cents. In the three month period, net sales fell by 26% to $1.44 billion, which undershot the $1.62 billion forecast. The company is in competition with game streaming services from the likes of Apple and Google, and it is clearly finding trading tough. Software and new hardware sales fell by 32.6% and 45.8% respectively. The company slashed is guidance too. Full-year EPS is tipped to be 10-20 cents, while the previous forecast was between $1.15 and $1.30.

Home Depot lowered its 2020 revenue guidance, hence why the stock is lower today. The company trimmed it guidance last month when it was posting its quarterly results, and now the company is predicting sales growth of 3.5%-4%, while equity analysts were expecting 4%. 

Boeing confirmed the 737 Max aircraft will remain grounded into 2020. It isn’t a surprise the aircraft won’t be re-certified before the year is out. 

FX

It has been a quiet day on the currency markets as there were no important economic announcements from Europe. Sterling is still strong as traders look ahead to tomorrow’s general election in the UK, where the pro-business Conservative party are tipped to win a majority of seats. The US revealed solid inflation figures as the headline CPI rate is now at 2.1% - a one year, but the US dollar index is still in the red.

Commodities

Gold is being helped along by the dip in the greenback. The lack of direction in European and US equity markets is helping gold too as some traders are buying the metal because uncertainty persists in relation to the US-China trade situation. The worries that exist in relation to the possibility of the US slapping on new tariffs on Chinese, is keeping gold elevated. 

WTI and Brent crude sold-off sharply on the back of the Energy Information Administration report. US oil stockpiles increased by 822,000 barrels while traders were expecting a draw of 2.76 million barrels. Gasoline stockpiles surged 5.4 million barrels, while the consensus estimate was for an increase of 2.5 million barrels. The rises in inventory levels suggest that demand is low. 

 


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