It’s been another poor day for European markets with the FTSE100 getting hit the hardest of Europe’s markets from a few big fallers caused by the fall-out from an M&A deal, and some disappointing trading updates, while the FTSE250 has slipped to a one year low. The DAX is also under pressure although it is finding some support at the 15,000 area and its October lows.
Europe
Sentiment continues to remain fragile and while the geopolitical noise from the Middle East hasn’t been as apparent today, it’s still there and remains a clear and present danger for nervous investors.
Rightmove is amongst the worst performers on the news that CoStar is buying one of its rivals OnTheMarket for £99m, or 110p in cash, raising concern that its now better resourced competitor will eat into its own market share, at a time when the UK housing market is facing its most challenging period since 2008.
Pest control company Rentokil has seen its shares plunge after a disappointing Q3 update, particularly over concern in its US operations. While the acquisition of Terminix saw growth increase, the rise was below the levels of organic growth seen in Europe which was 9.5% and 5.2% in the UK. The company also cut its operating margin in North America to 18.5% to 19%.
Packaging company Mondi is also getting hit after warning that soft demand had meant lower selling prices had affected its performance in Q3, posting its weakest quarterly EBITDA number this year at €261m.
On the plus side London Stock Exchange is higher after reporting an 8% increase in total income, and that the company was on target to deliver full year growth towards the upper end of its target range of between 6% to 8%. Data and Analytics performed strongly rising 7.2% and post trade rose by 17%.
Deliveroo’s latest Q3 numbers were very much a case of steady as she goes, which is a welcome change, with GTV rising 5% to just below £1.7bn, and the company maintaining its full year guidance on both growth and earnings.
US
US markets managed to open slightly higher this afternoon despite the continued rise in long- and short-term interest rates which are continuing to tighten financial conditions. In a further sign that the US jobs market continues to remain resilient weekly jobless claims slowed again to their lowest levels since January at 198k, with investors remaining cautious ahead of a speech from Fed chairman Jay Powell.
Netflix shares opened higher after crushing expectations for new subscribers in Q3% adding over 8m, taking total subscribers up to a record 247m, with an expectation of a further 8m in Q4. Profits also came in above expectations at $3.73 a share, above forecasts of $3.52. For Q4 Netflix says it expects to see revenues of $8.7bn, a rise of 11%, with net additions in line with Q3, although they said this could be affected by a $200m FX effect drag due to a stronger US dollar. The password sharing crackdown does appear to be bearing fruit, and while UK growth is slowing it is still positive with the stickiness probably down to the fact that Sky users have it as part of a bundle, which helps mitigate the cost.
Tesla share price has opened sharply lower after Q3 revenues came in below expectations at $23.25bn, and profits fell 37% to $2.3bn or $0.66 a share. Yesterday’s results showed the impact of the more competitive nature of the electric vehicle market and the chopping and changing in selling prices as Tesla strives to maintain its market share, not only in China where BYD is making great strides but also in its European and US markets, as operating margins plunged to 7.6%.
American Airlines shares have edged higher after reporting Q3 profits that beat expectations at 38c a share and revenues of $13.48bn. They went on to say that holiday bookings were still looking strong, however due to higher fuels and other costs they were having to cut their full year profits forecast to $2.25-$2.50 a share. This was broadly expected given the warnings seen earlier this week from the likes of United Airlines, who cited similar pressures.
FX
We’ve seen a modest retreat in the US dollar ahead of Fed chairman Jay Powell’s speech later today with little in the way of interesting price action to speak of.
The pound briefly sank to a 10-day low before rebounding, while the euro has continued to try and push back up to last week’s highs but is struggling to gain traction near the 1.0600 area.
Against the Japanese yen the 150.00 continues to cap the US dollar’s advance.
Commodities
Crude oil prices have slipped back today after sanctions were used on Venezuela allowing some extra supply on to the market, while prices also came under pressure as traders started to price out some of the immediate threat of an Iranian oil embargo on Israel.
As for gold prices, they are still looking resilient, and could well retest the highs of earlier this year above $2,000 an ounce unless we see an easing of the geopolitical tensions currently sending convulsions through financial markets.
Volatility
Caterpillar proved to be one of the most active single stocks on Wednesday in the wake of sector read across. There are concerns building that the current cycle of demand for construction related stocks may have peaked, leading the industrial heavyweight almost 5% lower on the day and contributing to wider market woes. One day vol on CAT sat at 59.69% against 40.57% for the month.
Keeping with the single stock theme and better than expected earnings yesterday morning boosted Proctor & Gamble. EPS came in above the upper end of forecasts, adding more than 2.5% to the underlying during the session. One day vol stood at 45.18% against 27.22% for the month.
Gold prices remained active off the back of haven demand given the ongoing situation in the Middle East, testing two and a half month highs as a result. There are however also concerns ahead of a speech by Federal Reserve boss Jerome Powell due later today that could see him double down on the higher for longer commitment to interest rates. That would arguably further boost the greenback and in turn risk taking a toll on dollar denominated commodities. One day vol for gold stood at 14.59% against 11.34% on the month.
A lack of risk appetite is also boosting the Swiss Franc. The Euro looks on course to close at a record weekly low against the Swiss Franc. One day vol on the cross moved to 6.73% against 5.91% for the month as a result.
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