Markets Round-Up on 25th October 2017.
Stock Markets
US stocks climbed with the major index registering its biggest daily percentage gain in more than a month, as stronger-than-expected results and forecasts from companies including 3M and Caterpillar fueled optimism about economic strength. The Dow was up 0.72% to 23,441.76, The S&P 500 up 0.16% to 2569.13 and the Nasdaq rose 0.18% to 6598.43.
Asian shares edged higher with scant leads from news headlines to move the markets. Investors are eyeing upcoming corporate earnings reports and U.S. politics for clues about the next Federal Reserve chair. The Nikkei fell 0.3% with some profit taking following earlier gains this week in response to the Japanese election, the Hang Seng climbed 0.5%, the Chinese CSI 300 was up 0.44%, The Australian ASX rose 0.14% and the Korean Kospi 0.08%. The Indian Nifty jumped 0.86%.
The FTSE 100 dropped just over 1% today closing below 7500 at 7447.2 for the first time since the beginning of the month having been in a very tight range for most of October. We have seen a muted response to earnings updates from a few of the indexes constituents, including Lloyds which said the company has had another “strong” financial performance for the first nine months of the year with profit increasing significantly, with the bank on track to deliver its long-term guidance, they closed positively on the day after initially being down over 2% in early trading. The FTSE 250 fell in contrast only a modest 0.2%.
The ECB announcement at its policy meeting on Thursday is expected to include details of a reduction of its monthly bond buying programme. European stocks fell with the Euro Stoxx 50 down 0.5% and the main national indexes all down (Germany 0.5%, France 0.4%, Spain 0.5% and Italy 0.8%)
This week has already seen many companies reporting and still to come include Alphabet Inc., Microsoft Corp. and Twitter Inc. in the technology sector. Ford Motor Co. and Volkswagen AG headline cars. Brewer Heineken NV joins European banks including UBS Group AG, Deutsche Bank AG and Barclays Plc.
Currency
The Dollar extended its rally on tax cut hopes and the Fed chair speculation. The Australian Dollar plummets after CPI miss. The pound rose to €1.1222 Euros and $1.325 US Dollars on the back of the GDP figures.
Commodities
Oil prices were largely steady (WTI 52.2, Brent $58.2), hovering near a four-week high hit a day earlier after top exporter Saudi Arabia said it was determined to end a supply glut.
Gold fell to a 2-1/2 week low today at $1279 after reports that Republican senators favoured John Taylor to become the next head of the U.S. Federal Reserve drove the dollar and U.S. bond yields higher.
Other News
The UK’s economy had higher than expected growth in the three months to September – increasing the chances of a rise in interest rates in November. Gross domestic product (GDP) for the quarter rose by 0.4%, compared with 0.3% in each of 2017’s first two quarters, according to latest Office for National Statistics figures. The production-side breakdown of GDP showed that services remained the largest contributor to GDP growth, growing 0.4%. Economists said the figures were a green light for a rate rise next week. If it happens, it will be the first rise since 5 July 2007.
Lloyds Banking Group said the company has had another “strong” financial performance for the first nine months of the year with profit increasing significantly, with the bank on track to deliver its long-term guidance. Net interest income for the company for the nine months up to 30th September was £8.21bn, up from £6.86bn the year before, whilst total income was up 6% to £13.89bn from £13.15bn. Pretax profit rose 38% in the nine-month period to £4.5bn from £3.27bn. Underlying pretax profit for the first nine months was up 8% to £6.57bn.
Antofagasta’s group copper production rose to 180,200 tonnes in the third quarter – 3.3% higher than in the previous quarter on increased production at Los Pelambres. Group copper production for the first nine months of the year was 526,500 tonnes, 4.5% higher than last time. It said this was primarily due to higher production at Centinela and Antucoya. Gold production during the quarter increased by 1.2% to 59,600 ounces and for the first nine months fell by 4.4% with lower production at Centinela and Los Pelambres.
Pharmaceutical giant GlaxoSmithKline saw third quarter sales rise 4%, helped by demand for new HIV, lung and meningitis products. This keeps it on track to hit its full-year targets as new boss Emma Walmsley refocuses its drugs range. Sales rose 4% to £7.8bn, while total operating profit rose 31% to £1.9bn. At constant exchange rates, its performance was more muted, with sales up 2%, while total operating profit increased by 27%. Despite these positive results, the GSK share price has fallen today by 5.5%.
Multinationals booking profits in overseas entities led to the avoidance of £5.8bn in UK corporate taxes last year, a 50% increase on HMRC’s estimates, according to figures obtained by Pinsent Masons. Its lawyers suggest the rise in estimates from HMRC reflects a more aggressive attack on transfer pricing arrangements since George Osborne introduced the so-called Google tax in 2015. Ian Hyde, a tax partner at Pinsent Masons, said: “The tax affairs of the UK’s largest businesses are a top priority for HMRC, particularly the use of cross-border structures including the possible manipulation of pricing methods. HMRC has been investing in transfer pricing specialists and this is clearly reflected in the figures.”
A report from the Recruitment and Employment Confederation has suggested that businesses will continue to hire workers, regardless of indications that the economy is slowing down. The REC found that the proportion of companies getting more confident in their hiring and investment decision outweighed those becoming more gloomy by a margin of 10% in October. It is the third consecutive reading of 10%, indicating sustained resilience in recruitment. Meanwhile, a net balance of 9% of employers see the economy overall worsening, though this has not put them off hiring. The REC believes more clarity on Brexit would help to calm bosses’ fears over the economic situation.
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