Sentiment in Europe is poor as dealers are fearful about the potential political fight between the Italian government and the EU, adding to that, the growth rate in the eurozone disappointed. 

Europe

The situation in Italy has the potential to trigger another round of the debt crisis, and the last thing the currency bloc needs is softening growth, which was confirmed today.

BP shares are in demand after the company revealed solid third-quarter figures. The company confirmed that underling replacement cost profits exceeded $3.8 billion, which comfortably topped the consensus estimate of just below $2.8 billion. Projects in Australia and the Gulf of Mexico started sooner than expected, and that boosted earnings. BP agreed to buy BHP Billiton’s US shale assets for $10.5 billion, and proceeds from oil will be used to pay for the business – provided the oil prices holds up. The firm originally planned to fund half the purchase with equity. BP is still on track to divest assets, and the proceeds will be used to pay down debt. The gearing position dipped to 27.5% to 27.8%, which is a tiny improvement, but the disinvestment programme should chip away at the net debt level.

Reckitt Benckiser shares are lower today after the group confirmed that third-quarter organic sales growth slowed to 2%. Net revenue for the period came in at £3.1 billion, which undershot the £3.2 billion that analysts were expecting. The group announced that a manufacturing problem at a factory in Europe held the company back, and the issue could impact the fourth-quarter too. The company have had a couple of standalone incidents in recent years, which has dented it reputation, and todays update hasn’t helped.

US

The major equity indices are in positive territory as stocks have bounced back from yesterday’s losses, but traders will be keeping a close eye on the relationship between the US and China. President Trump talked about a desire to strike a ‘great’ deal, but he isn’t afraid to impose additional tariffs.

General Electric shares got off to a negative start after the company slashed its quarterly dividend from 12 cents to 1 cent. The group revealed an ambitious restructuring programme too, as the group incurred a write-down of $22 billion. The firm paid $5.1 billion into the pension fund, which was a sizeable increase on last year’s figure of $1.2 billion, and was a drain on the company’s cash position too. Excluding the write-down, third-quarter earnings per share were14 cents, which undershot analysts’ forecasts of 20 cents. The stock managed to claw back earlier losses, but given it has been in decline since December 2016, the wider outlook remains negative.

Facebook will be in focus tonight when the company will release its third-quarter results.  The social media giant has had it fair share of negative news recently as concerns over privacy grow. The firm is getting ready for tougher regulation from the EU by hiring former deputy prime minister, Nick Clegg, as its global head of communications. The former policymaker was an MEP in Brussels, and has the inside track. 

US Conference Board consumer confidence jumped to 137.9 in October –an 18 year high, and the consensus estimate was 136. The September report was revised lower to 135.3, from 138.4. The CaseShiller house price report showed that prices are continuing to grow at a slower pace. The August report registered 5.5% growth, while July saw 5.9% growth. The housing market is possibly coming under pressure due to the higher interest rates, but we are likely to see further monetary tightening from the Federal Reserve.

FX

EUR/USD is largely unchanged today after the eurozone released some largely mixed data. German unemployment held steady at 5.1%, and inflation ticked up to 2.4% - both reports met forecasts. Third-quarter eurozone GDP was 0.2%, and the consensus estimate was 0.4%. The growth rate in the currency bloc was 0.4% in the second-quarter, and that highlights the poor performance in the latest quarter.

GBP/USD is lower on account of the firmer US dollar and the disappointing CBI realised sales report. The greenback is in demand again due to the continued chatter about additional rate hikes from the US central bank. The CBI realised sales report dropped to 5 in October, which completely missed the forecast of 27.

Commodities

Gold is in the red due to the rise in the US dollar. The metal has had a strong inverse relationship with the greenback recently, and that is playing out today. US stocks are a little higher, so gold is missing out on the flight to quality play.

Oil lost further ground as dealers continue to be concerned about future demand levels on account of trade tensions. The US-China trade spat is hanging over the market. Production from Russia, Saudi Arabia and the US reached 33 million barrels per day for the first last month, and that is weighing on the price too

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