Stock markets are mixed as the bullish sentiment in the wake of the US midterms fades. 

Europe

The European Commission predicts that growth in the eurozone will cool in the next two years. The organisation also predicts that the UK economy will see the smallest growth in all of the EU countries in the next two years. Uncertainty over Brexit was cited as reason for the downbeat forecast, but the British economy has outperformed many eurozone nations in recent years, so a cooling of growth isn’t a surprise. 

Sainsbury’s announced a decent set of first-half numbers. Like-for-likes sale for the six month period increased by 0.6% ,and it is worth noting that sales growth in the first-quarter was 0.2% Profits in the six month period fell by 40%, but when you remove the costs associated restructuring due to the proposed merger with Asda, earnings increased by 20%. The Competition and Markets Authority have thrown up a few road blocks in relation to the proposed Asda merger. The supermarket sector is still ‘high competitive’, and the group issued an ‘uncertain’ outlook for the Christmas period.

Superdry revealed a 7.4% increase in first-half revenue. Sales in the second-quarter drove the figures for the six month period. In the last three months, sales jumped by 11.2%, while the first-quarter saw sales increase by 1.3%. The stock has yet to recover from the sell-off in October when the group issued a profit warning. The particularly warm summer was blamed for the disappointing performance. The wholesale and online operations saw respectable growth. The fashion house is rolling out new stores in China, which seems strange as it appears to be bucking the industry trend.

Tate & Lyle confirmed that first-half profit was unchanged on the year. The interim dividend was slightly raised, but costs crept up too. The firm kept its full-year outlook unchanged, and that kept shareholders on side. The stock has been in an upward trend since March, and if it holds above the 200-day moving average at 622p, the upward move should continue.

US

Stocks have slipped on Wall Street as trader square up their positions head of the Fed meeting later. The bullish sentiment from the midterms has evaporated, and now it’s back to reality, and traders have turned their attention to the US central bank meeting. The fact that the S&P 500 and NASDAQ 100 are only a small bit lower bodes well for the bounce back that began late last month.

The Federal Reserve will announce their interest rate decision at 7pm (UK time). Rates are tipped to remain on hold, but there continues to be speculation that we might see four rate hikes over the next 12 months. Dealers will be analysing the statement to decipher how hawkish they will be in the coming months. Concerns that interest rates will be hiked too fast was one of the reasons for the recent sell-off, so dealers are likely to be nervous going into the announcement.

US jobless claims came in at 214,000, in line with forecasts, and the last weeks figure was revised higher by 1,000 to 215,000. The US labour market is in great shape, and slight changes in either direction aren’t going to put the Federal Reserve off their path of monetary tightening.

FX

The US dollar index has recouped some of the ground that was lost yesterday. The Federal Reserve will announce their interest rate decision at 7pm (UK time) and no change to monetary policy is expected. The US central bank is still on course to hike interest rates in December .The statement that accompanies tonight’s rate decision will be carefully watched for clues about future monetary policy.

GBP/USD is lower on the session, and the poor UK housing data contributed to the move. The Royal Institute of Chartered Surveyors house price balance fell to -10 in October – its lowest reading in six years. This adds to the series of negative stories surrounding the British property market.

EUR/USD has managed to move a little higher this afternoon as the dollar has dipped a little. The German trade surplus for September was €17.6 billion, which was a slight decrease from the €18.3 billion surplus in August. The French trade deficit was €5.66 billion, largely unchanged from the previous month. The trade German surplus will be of particular interest to Mr Trump seeing as he is keen to rebalance the trading relationship between the US and the EU.  

Commodities

Gold is in the red today on account of the firmer US dollar. In recent months, the commodity has had a strong inverse relationship with the greenback, and that relationship has overshadowed the risk-off play that gold has historically benefitted from. The metal has witnessed low volatility recently, and it has been edging lower, but while it holds above the $1,214 mark, its outlook might remain positive.   

Oil remains under pressure as traders are worried over-supply. The US has over taken Russia as the world’s largest oil producer, as output from the US has reached a record level. There are also indications that Indonesia, Iraq and Abu Dhabi might hike production in 2019. The Chinese trade figures overnight gave some encouragement to the buyers, as imports jumped by 21.5% on the month, comfortably topping the 14% forecast. China is one of the eight countries allowed to keep buying oil from Iran, and while the exemptions remain in place, oil is likely to remain weak.

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