Markets Round-Up 26th October 2017.
Stock Markets
U.S. stocks slumped last night as, as a round of disappointing corporate earnings and a spike in bond yields put both the Dow (23329.46 ⇓0.48%) S&P 500 index (2557.15 ⇓0.47%) and Nasdaq (6563.89 ⇓0.52%) on track for their worst session in seven weeks.
Asian stock markets were hit by the negative lead from Wall Street and as investors digested regional corporate earnings results but managed overall to overcome the negative sentiment (Japanese Nikkei 1753.9 ⇑ 0.14%, Hong Kong Hang Seng ⇓0.36%, The Chinese CSI 300 ⇑0.42%, Taiwan TAIEX ⇓0.15% Korean Kospi ⇓0.48%, Australian ASX ⇑0.18% and the Indian Nifty ⇑0.29%.
In the UK today markets staged a modest recovery after the first pull back of any significance since September. Yesterday was dominated with sterling strength following the GDP reading. Today all eyes were on the ECB. Draghi’s comments were seen to be “dovish” and outlined that the end to QE was insight. Rates remained on hold however many now feel that the November rate rise in the UK is a given. This helped some financials with Lloyds adding weight after yesterdays muted response to its results, however Barclays results caused some consternation and sank to lows not seen since this time last year. The FTSE 100 and the 250 were both up ⇑0.5% (7486.5 & 20,163.4)
European stocks rose sharply after the European Central Bank (ECB) announced that it plans to extend, but reduce, its bond-buying program. (Euro Stoxx 50 ⇑1.3% 3637.2, German Dax ⇑1.4%, French CAC40 ⇑1.5% , Spanish IBEX ⇑1.9% , Italian MIB ⇑1.6% )
Currency
The Euro weakened on the ECB news. The Pound however remains strong following the higher than expected GDP figures yesterday. The pound to €1.128 Euros and $1.317 US Dollars.
Commodities
Oil prices inched up (WTI 52.6, Brent $59.1) , despite being pressured by an unexpected increase in U.S. crude inventories and as oil output and exports from the United States rose last week.
Gold slumped anew to $1267.8, keeping the yellow metal pinned near its lowest levels in about three weeks as the dollar’s move up against the euro helped to dull demand for precious metals.
Other News
The European Central Bank has announced that it will continue to taper its the size of its asset purchase programme, albeit while extending it until September of next year. As expected by many economists, rate-setters in Frankfurt opted to halve the pace of quantitative easing from €60bn-worth of assets each month to €30bn, starting from 1 January 2018. In parallel, they were now due to run for a further nine months from that date “or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.” If necessary, the ECB also said it stood ready to increase the size of the APP again.
Barclays posted group pre-tax profits of £3,448m for the third quarter. The group said the result was driven by a £932m reduction in operating expenses, primarily reflecting lower litigation and conduct and non-core costs. Income reduced £405m due to the non-recurrence of the £615m gain on disposal of Barclays’ share of Visa Europe Limited in 2016.
Debenhams’ reported pre-tax profits fell by 44.2% to £59.0m in the 52 weeks to 2 Sep but the group said it made good progress in setting the foundations for its new strategy, Debenhams Redesigned. Underlying pre-tax profits of £95.2m were down by 16.6% and group EBITDA fell 7.0% to £217.0m. Group gross transaction value rose by 20% to £2,954.1m and the dividend was maintained at 3.425p per share. Like-for-like (LFL) sales grew 2.1% with UK LFL at 0.0%, reflecting growth in Destination categories; strong digital momentum; and a weaker H2 trading environment.
BT will slash costs for up to one million of its landline-only customers after a review by regulator Ofcom. From April 2018, the telecoms company will reduce the price of its monthly line rental by £7, a 37% decrease from the current cost of £18.99. The reduction will save households £84 a year and customers will be protected from price increases with rental costs capped at the rate of inflation. Ofcom expects other providers to follow suit.
UK car production fell during September as confidence was hit by Brexit uncertainty, according to a major car industry body. Plans to improve air quality also added to the decline in car output, the Society of Motor Manufacturers and Traders (SMMT) said. A 14% fall in demand in the UK market drove the overall drop, it said. But a government spokesperson said “the UK’s automotive industry remains a great British success story”.
Apple has hired Jay Hunt – the former controller of BBC One and chief creative officer of Channel Four – to join its video team. Ms Hunt was responsible for TV shows including Sherlock and Luther at the BBC before helping Channel 4 sign up the Great British Bake Off. Her title at Apple will be creative director, Europe, worldwide video. Apple has not specified what it involves, but she is expected to commission programmes on its behalf.
Research from UK Finance reveals that banks contributed £35.4bn to the public finances last year, up 3.5% on the year before. The total tax paid by the sector – excluding payroll and other taxes deducted at source – rose 11% to £19bn, accounting for 5.4% of the government’s total tax take. Foreign banks accounted for almost half of the total figure – £17.3bn. The report shines a light on the importance of agreeing a post-Brexit settlement that supports the sector, and crucially the foreign banks who have chosen to base themselves here.
Donald Trump’s Fed chair sweepstakes is heating up. The president told Fox in an interview that “you have to make your own mark,” but quickly added he likes incumbent Janet Yellen. Trump said last week that Gary Cohn has no chance, according to a person familiar with the remarks. Jerome Powell is still the frontrunner, followed by Yellen and John Taylor, on the PredictIt site.
US pending home sales were flat in September, according to figures from the National Association of Realtors. The NAR’s monthly index came in at 106.0 last month, unchanged from a downwardly-revised August figure and versus expectations of a 0.2% increase. The index is now at its lowest level since January 2015 and 3.5% below a year ago, having fallen on an annual basis in five of the past six months. NAR chief economist Lawrence Yun said the quest to buy a home this fall continues to be a challenging endeavour for many home shoppers.
Official figures show wages fell in real terms by 0.4% in the year to April 2017. The Office for National Statistics (ONS) said this was the first fall in three years. It says that although wages rose by 2.2% in the year, inflation rose by more, eroding any gains. The median – middle – amount earned was £550 a week. Other data shows a narrowing of the gender pay gap to 9.1%, its smallest since the survey began in 1997. The weekly income figure shows the first recorded fall since April 2014, and follows a rise in inflation in the wake of the Brexit vote in June last year. Earnings, not adjusted for inflation, rose in 2017 by more among the lowest-paid workers
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