Equity markets are a mixed bag as there is chatter of an extension in relation to Brexit.
Europe
UK politics remains in limbo as there is speculation the UK’s exit from the EU will be pushed back to early 2020, and there is also chatter of a general election. The possibility of a no-deal Brexit seems to have been greatly reduced, which is music to dealers’ ears. While there remains a lack of clarity in relation to Brexit, stock markets are likely to meander. Things haven’t gone exactly according to plan for Prime Minister Johnson, but the fact that he managed to strike a deal with the EU, and get support for it, suggests that things are heading in the right direct.
Metro Bank will announce its third-quarter figures are the market close. The bank has had a tough time in the past year due to an accounting error, in addition, the FCA, are carrying out an investigation into senior management. Vernon hill, the co-founder and chairman stepped down from his role with immediate effect. It looks bad that he is parting ways on the day up an update, but then again the stock has lost more than 95% of its value in the past 19 months, so it’s no surprise that he has finally left.
Fresnillo warned that full-year guidance will be at the lower end of their forecast, and keep in the mind the guidance was already lowered. The mining company confirmed that third-quarter silver production dropped by over 14%, while gold production slipped by 7%. Lower ore grades were cited from the underperformance. The mining company confirmed that silver production in the final quarter would be higher.
US
Sentiment on Wall Street is positive as traders are still cautiously optimistic about the US-China trade situation. A senior member of the Chinese government said that cooperation between the two sides is mutually beneficial, which is a fine example of stating the obvious, but at least the language is positive. Equity traders are likely to remain hopeful as long as the commentary from both sides is conciliatory.
In a strange turn of events, Boeing, posted poor figures but the stock is higher on the day. Third-quarter EPS dropped over 50% to $1.45, while the consensus estimate was $2.09. Revenue dropped by 21% to $19.98 billion but traders were expecting $19.67 billion. The aircraft manufacturer didn’t give any update to its full-year outlook, which speaks volumes as firms don’t tend to withhold positive views. The group said the monthly production rate of 787 aircrafts would be lowered to 12 from 14, which suggests reputational damage. The stock is holding up for now, but there are concerns the group will have to increase in provision in relation to the 737 Max scandal.
Caterpillar revealed a poor set of numbers, but the reaction has been muted. Third-quarter EPS was $2.66, which undershot the $2.87 forecast. Revenue was $12.80 billion, while traders were expecting $13.41 billion. To make matters worse, the group reduced its full-year EPS outlook to $10.59-$11.09, and equity analysts were expecting $11.70. The firm has exposure to China, the global mining sector, as well as the American construction sector, and all are under pressure, so the outlook isn’t great for Caterpillar.
FX
GBP/USD is showing modest gains even though it was in the red this morning. Like Brexit, the pound is bouncing around. There is talk the UK will be granted an extension in relation to leaving the European Union, which is why the pound is in limbo – just like Brexit. Traders are terrified at the prospect of a no-deal Brexit, but that currently seems very unlikely, which is assisting the pound.
USD/CAD is largely unchanged on the day even though Canada posted disappointing wholesale trader figures. The update showed a 1.2% fall in August on a monthly basis, while economists were expecting an increase of 0.3%. The July report was revised lower to 1.4% from 1.7%.
Commodities
Gold has pushed higher this afternoon but it still remains in the $1,480-$1,500 range. The metal hasn’t moved a whole lot recently, but then again volatility across equities as well as the US dollar have been low too. Should the commodity retake the $1,500 mark it might seek to target $1,520.
Brent crude and WTI have rallied on the back of the Energy Information Administration report which showed a decline in US oil and well as gasoline inventories. Oil stockpiles dropped by 1.69 million barrels, while traders were expecting a build of over 2 million barrels. Gasoline inventories fell by 3.1 million barrels, which was a larger fall than expected. Traders snapped up oil futures as the reports point to an increase in US demand.
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