The FTSE 100 is underperforming its Continental counterparts as major declines in commodity stocks are weighing on the index. 

Europe

The London market has a relatively large exposure to energy as well as mining stocks, so the concerns about a global slowdown are hitting the FTSE 100 extra hard. Consumer stocks are under pressure too as the latest UK services data showed a contraction in September, and that suggests that consumers are curtailing their spending ahead of Brexit. Sterling is relatively strong today, which is impacting the FTSE 100 too.

The German market is closed today as the country celebrates Unity Day. The CAC 40, IBEX 35 in addition to the FTSEMIB are holding up well considering the turmoil in the UK market, but it is possible they will play catch-up tomorrow when German traders are back to work.       

Ted Baker have gone from bad to worse as the group swung to a first-half loss of £23 million, which compared with a profit of £24.5 million in the same period last year. The group issued two profit warnings in 2019, so today’s news was another blow to the share price. The company blamed ‘very difficult trading conditions’ for the poor numbers, and it warned that revenue could drop below last year’s if the trading environment doesn’t pick up. The less than optimistic outlook was the salt in the wounds of the tepid update. The stock is down 39%        

Stagecoach issued a reasonably positive trading update. The group said that like-for-like revenue growth at the UK bus department ticked up by 1% in the 14 weeks until mid-September. The group claimed the non-rail unit has been largely trading in line with expectations. Stagecoach maintained its full-year outlook, and it said it will pursue claims against the government from being disqualified from the rail franchise competitions.          

US

US stocks initially tumbled today as concerns about the health of the US economy grew, but the S&P 500 has rebounded, and is now showing a small gain.  The ISM non-manufacturing reading slipped to 52.6, from 56.4. It was the lowest reading in Since August 2016. When you take into consideration the ISM manufacturing reading earlier in the week was the worst in 10 years, it highlights the slowdown in the US economy. The jobless claims rate ticked up to 219,000, from 213,000, which isn’t a major deal, but it adds to the worries about the health of the US economy.      

Tesla had a record third-quarter in terms of deliveries as the company delivered 97,000 vehicles, equity analysts were forecasting 99,000. It is encouraging to see that the group is boosting its level of output, but the company still might struggle to achieve its target annual production target of between 360,000 and 400,000 vehicle. The company would need to deliver in excess of 100,000 vehicles in order to achieve the lower end of the forecast, so the pressure is on the group. The stock is in the red today.

PepsiCo shares are a little higher today on the back of the well-received third-quarter numbers. Revenues increased by 4.3% to $17.19 billion, which topped the $16.93 forecast. EPS came in at $1.56, topping forecasts. The group is keeping up with the changes in society, as consumers are keener to have healthier snacks ,and the group saw solid revenue growth in that division. It is a testament to PepsiCo’s management that the share price is close to a record high while the S&P 500 is more than 4% from its all-time high.   

FX

GBP/USD is higher on the day as traders are not worried about a no deal Brexit. The pushing higher in the pound indicates that traders predict an extension will be granted, or some sort of deal will be reached. The proposals from Boris Johnson were well received the DUP, but Ireland’s Varadkar wasn’t too keen on the suggestions, so the politics remain uncertain. 

EUR/USD has been lifted by the dip in the US dollar. The eurozone services data were largely poor this morning, especially the German reading as it came in at 51.4 – an eight month low. Recession fears in Germany are growing, but slowdown fears in the US are putting even more pressure on the greenback.       

Commodities

Gold has been given a boost by the decline in the greenback in addition to the uncertainty in stock markets. The worries about the state of the US economy has boosted gold twofold, as the greenback has been dented, plus dealers are in risk off mode.

Oil has endured heavy losses again as the chatter about a global slowdown has hurt the energy market. Not long after the US revealed the much-worse-than expected ISM non-manufacturing report, the oil market took another leg lower, as demand worries circulate. 

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.