• October a big month for stocks • Only hints of stimulus from BOJ • IAG stock dumped after raising guidance • RBS shares down but not out • US oil majors report on Friday After getting bloody-nosed in August and wobbling in September, global markets have come out fighting in October. It’s been the best month for stocks in Germany since 2011 with even China seeing the first positive month since May. Stocks in Japan traded higher on Friday after the Bank of Japan held off on adding to stimulus efforts but governor Kuroda said he doesn’t see any barriers to more asset purchases. Kuroda’s comments were taken as a hint at further stimulus if inflation remains low. That said, a balance sheet already half the size of Japan’s GDP while buying all of the new issuance of JGBs would probably suggest there is a limit to the BOJs buying. Despite this month’s rally there is still hesitancy across stock markets. From low levels, the mere chance of more ECB and BOJ stimulus and a delayed hike from the Fed was enough to spur short-covering. The question is; with the Fed now putting a December US rate-rise back on the table, have investors got the stomach to turn from short-covering to actively bullish. The oil price slump has created a clear divergence in earnings on the FTSE 100 on Friday. Lower fuel costs have prompted a rise in profits and a first dividend at airline operator IAG but on the opposite end of the scale energy giant BG Group profits have slumped. Despite beating third quarter earnings expectations IAG shares tanked to the bottom of the FTSE 100. The rise in full year earnings guidance was a bit conservative so it raises a question over the timing of introducing the dividend when Aer Lingus is not yet integrated. It was another rough day for Britain’s banks thanks to Royal Bank of Scotland missing third quarter earnings estimates. RBS missed pre-tax profits largely because of a steep rise in restructuring costs under CEO Ross McEwan’s turnaround plan. Shares dropped on the headline miss but net income has risen over the same period last year, RBS has successfully sold Citizens bank and provisions for legal settlements are well down which are all positives going forward. The avoidance of a debt default and government shutdown is helping US stocks edge towards a positive start on Friday ahead of important inflation data that could play a big part in the Fed’s decision whether to hike rates in December. Plunging profits are almost guaranteed from US oil super-majors Exxon and Chevron in third quarter reports Friday. The share price performances will likely rest on the profitability of the refining business and any update on capital expenditure plans. USA pre-opening levels S&P 500: 1 point higher at 2,090 Dow Jones: 13 points higher at 17,768 Nasdaq 100: 3 points higher at 4,673 CMC Markets is an execution only 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.
Mid-morning market update: Wings clipped on shares of British Airways-owner IAG
11:00, 30 October 2015