Lacklustre reaction to debt ceiling deal, but Europe reclaims ground heading into the close
The age old city adage of buy the rumour and sell the fact was perfectly demonstrated this morning, with the recent rally on resolution whispers reversing as final confirmation of a deal hit the headlines.
Travis Perkins saw their stock offered lower, despite total Q3 sales rising 8.6%. The firm announced that it is still on track with EPS targets despite lower property disposal gains. The statement also backed the recent improvement in construction, noting that the stronger trading conditions that they had experienced were “a reassuring indicator of improved sentiment in construction”.
B Sky B shares rallied nearly 5% in early trade following a much anticipated update in light of a recent attack from BT’s new sports service. Some reports had indicated that there was potential for an exodus after the free offering to BT broadband customers, but the addition of 111,000 broadband and 37,000 TV customers saw revenue hit targets and perhaps dispel concerns of a change in the tides. BT group slid in the opposite direction on the announcement.
An improvement in performance from both Europe and North America have seen brewer Sab Miller beat expectations for first half volumes. Sales continue to improve in emerging markets too, with a 9% increase in Africa as well as continued progress in Latin America and Asia Pacific.
US stock markets opened lower once again as traders digest and assess the impact of the fiscal impasses on short term economic growth following a deal to raise the debt ceiling.
On the single stock front, IBM are losing traction after they announced earnings after hours yesterday, with results coming in lower then analyst estimates. Their shares are seen offered 6% lower after a 4% drop in third quarter earnings to $23.7, reflecting lower demand for hardware from emerging economies.
Shares in investment banking giant Goldman Sachs are trading down 3% after premarket news of a 2% drop in third-quarter revenues, despite announcing an increase in quarterly dividends and earnings per share beating analysts’ estimates. The weaker than expected sales reflect lower trading volumes and slowing client activity. Michael Corbat, CEO of fellow US bank Citigroup also announced earlier this week that his group had seen a drop off in trading activity.
The US dollar has lost ground across the board today, as focus shifts to the economic consequences of the government shutdown. The dollar sell-off hints at the markets view of Fed tapering, which must surely now be pushed back well into 2014 given that we are very much in the dark as to the real effect on US growth of the shutdown until the government data departments are back up and running. Also weighing on the greenback was news that a Chinese ratings agency, Dagong Global Credit Rating, cut its rating for US debt to A- from A, following on from Fitch putting the US on ‘negative watch’ on Tuesday.
One of the main beneficiaries of the dollar’s slide has been the pound, as better than expected UK retail sales figures for September of 0.6% versus 0.3% expected, boosted confidence in the UK Plc recovery story after some relatively mixed data in recent weeks.
WTI crude oil has weakened following the biggest rise in a week as the US increases its stockpile. US crude supplies climbed by 5.94 million barrels last week causing futures to drop as much as 1.3 per cent.
Gold has reached a four week high as Dagong Global Credit Rating cut its rating for the US and on speculation that the Fed will postpone its tapering process. Bullion climbed as much as 3 per cent following the downgrading to “A-“ from “A” as worries about the dollar sent investors flocking to gold as a relative safe-haven.
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