• Oil / BP weigh on FTSE • Talktalk shares bounce back • Apple shares higher into earnings • Oil prices hit 2-month low UK & Europe Activity was subdued again on Tuesday with below-average volume as markets feared the Federal Reserve could topple last week’s central bank stimulus-inspired rally at Wednesday’s meeting. Falling oil prices and another quarter of declining profits at oil major BP leaned on the UK energy sector whilst weak data from China prompted another losing day for heavily-weighted mining stocks. There was fairly broad-based selling as data showed a bigger than expected drop in UK GDP growth in the third quarter but volumes were subdued ahead of Wednesday’s Federal Reserve meeting. Data showed third quarter UK GDP grew by 0.5%, a solid level of expansion but nonetheless lower than expectations of 0.6% and the 0.7% seen in Q2. Slower levels of production and a worrying decline in construction ate away at growth in the dominant service sector. Shares of oil BP erased early gains as falling oil prices took the edge off a lower than expected fall in profits at the oil giant. Profit crashed by more than 40% over the same period in 2014 10 £1.8bn but this was better than the £1.2bn forecasted. The sharp fall in oil prices has been bad for overall profitability but BP’s refining business has managed to capitalise with margins improving more than forecasted. The market reacted favourably to BP’s prudent cut in capital expenditure to match the drop in oil prices that makes a dividend-cut less likely. Shares of Talktalk surged over 13%, recouping most of the previous day’s decline. The arrest of a 15yr old in Northern Ireland suspected of carrying out the cyber-attack and the company refusing to cave in to demands to waive contract cancellation fees has raised hopes amongst investors that the incident may find a quick conclusion. US US stocks dropped back a little on Tuesday’s open amidst a number of disappointing economic reports that minimise the already unlikely probability of a Fed rate-rise on Wednesday. Earnings were a bit more encouraging from some of America’s best household name companies. UPS, Comcast and Burger King-owner RBI all surpassed estimates while US listed Chinese ecommerce company Alibaba saw revenues jump 32%. Dupont shares fell after the company reported a fall in profits, blaming familiar boogiemen the strong dollar and weaker demand in emerging markets. Having dived 3% on Monday, the worst decline since September, Apple shares saw a modest bounce on Tuesday leading into earnings reported after the closing bell. Few doubt Apple’s earnings power but there is a concern that iPhone 6s sales won’t live up to sky-high expectations. If the number of iPhone units sees a year-over-year decline, it might be taken as a sign that the global smartphone super cycle has peaked. Any comments regarding the tech giant’s expectations for the critical holiday quarter may even eclipse the results themselves. Not much is expected to be drawn from Apple’s most recent launches including the Apple Watch, Apple Music and Apple TV, the sales of which will likely not be separately broken out in the report. FX The US dollar was mostly unchanged on Tuesday after durable goods dropped less than expected in September but August were revised lower. The Japanese yen was the best performer while the Norwegian krone slumped alongside oil prices. The British pound dropped after GDP data showed a bigger than expected growth slowdown in the third quarter. EUR/GBP regained 0.72 while GBP/USD eroded a lot of the previous day’s gains falling back to just above 1.53. A fall in the US 10yr yield ahead of Wednesday’s Fed meeting alongside weaker stock markets weighed on the dollar-yen pair, helping the yen higher across the board before the BOJ meeting. There are cracks appearing in Norway’s economy thanks to the fall in oil prices, the breakdown to 2-month lows in WTI crude was taken as a bad omen by krone traders. Commodities Oil prices slid again on Tuesday. WTI crude broke down to two-month lows as the US government signed off on a deal to sell some its strategic petroleum reserve from 2018 until 2025 ahead of an expected build in weekly API inventories data. Gold prices have closed essentially unchanged for the past three days. The precious metal traded in a tight band on Tuesday with a slight positive bias after data showed an increase in Chinese buying following some disappointing US economic data that weighed on the dollar. 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. 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Daily Market Wrap: Crude oil spills to 2-month low as BP profits crash
16:55, 27 oktober 2015