Stocks are lower today as continued political uncertainty is weighing on investor sentiment. 

Europe

The US and China have called a truce to the trade dispute, but that just means the problem has been put on hold until the New Year. A truce is better for market confidence than a further escalation, but the lack of a solution is still playing on investors’ minds. Italy is still in the news, as the government’s proposed budget deficit will be under review from the EU. The two sides are still at loggerheads, and neither one is showing signs of backing down. 

Ferguson had a solid start to the year as first-quarter profit rose by 9.9%. The UK company derives roughly 90% of its earnings in the US, and the division posted a 9.6% rise in earnings. The outlook was optimistic too, as the group believes that annual profit will meet analysts’ forecasts. The stock sold-off heavily in October when the firm confirmed that trading in the UK remained ‘tough’, and the British division continues to be restructured. There are signs the US housing market is coming off the boil, and is likely to hang over the stock.

Greencore shares are in the red despite the company posting solid full-year figures. On a pro forma basis, revenue grew by 8.7%, and adjusted operating profit edged up by 1.7%. The company has been preparing for Brexit ever since the referendum in June 2016, and even thought it expressed concerns about a ‘no withdrawal agreement’ situation, it remains confident about the medium-term outlook. In October, the firm announced plans to sell its underperforming US business and that lifted investor sentiment. The stock has been pushing higher since March, and if the positive move continues it might retest 200p.

Rightmove shares are in higher despite mixed broker reviews. JP Morgan trimmed its price target from 416p, to 402p, but Deutsche Bank have raised their rating to buy from hold, and upped the price target 530p, from 440p.

Kier Group are lower today after the company announced a rights issue on Friday in a bid to help pay down its debts. There is chatter the company will be demoted from the FTSE250, and to make matters worse, JPMorgan and Canaccord greatly reduced their price targets for the stock.

Thomas Cook shares are in the red again as dealers are worried about the company’s debt levels. The cost borrowing for the company, and the cost to insure its debt have both risen greatly recently, and that has hurt the stock.

US

The major US indices have turned lower as equity markets have handed back some of the ground made yesterday on the back of the trade-war truce that was announced at the G20 summit. Traders are starting to realise that the trade dispute between the US and China is still ongoing, it just has been put on hold. Investment sentiment will struggle to be upheld until there is clarity on the situation is provided.

Toll Brothers topped confirmed that quarterly orders fell for the first time in more than four years, and that sent the shares lower. Traders overlooked the rise in revenue and the surge in earnings, and focused on the new orders – a key indicator a future demand. 

FX

GBP/USD has rallied after an advisor to the European Court of Justice claimed the UK can withdraw its notification to leave the EU without obtaining persimmon from other member states. Keep in mind this is the opinion of one individual, and not it is not legally binding. Given that the majority of MP’s are not in favour of a ‘no-deal ‘scenario, today’s announcement has lifted the pound as traders feel the possibility of the UK leaving without a deal has been greatly reduced.

EUR/USD has been given a lift by the dip in the US dollar and the firm eurozone PPI helped too. Producer prices in the currency bloc jumped to 4.9% - a seven year high. The robust PPI reading in October could be down to the multi-year high that was reached in the oil market. We are likely to see higher CPI in the coming months. That being said. While the euro remains below the 1.1500/10 region, its outlook is likely to remain negative.

Commodities

Gold hits its highest level in over one month thanks to the weakness in the US dollar. The metal is showing signs of continuing the wider upward trend that began in mid-August, and if the $1,243 region is cleared, it could pave the way for the $1,265 area to be targeted.

Oil has ticked up on expectations that OPEC and its partners will announce a cut it production later this week. The energy market received a major boost yesterday after it was announced that the US and China will enter a cease-fire, in relation to the trade dispute between the two countries. Canada announced plans to trim production and that is supporting prices too. 

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