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UK Annual Budget Plan to be announced- EMEA Brief 29 Oct

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  • Philip Hammond to announce the last UK annual budget plan before Brexit on Monday
  • HSBC announces a rise in profit before tax of around 28% year-on-year to $5.922billion
  • IBM to acquire Red Hat for $34billion, buying all shares at $190 each
  • Jair Bolsonaro wins Brazilians Presidential election with just over 55% of votes
  • Merkel’s Christian Democratic Union votes falls to 28% from 38.3% from the last election
  • Economic growth for China fell short of expectations, including an economic slowdown in recent shipping data
  • Investcorp to increase investment in the US, as well as looking to expand into the Asian markets, particularly China and India
  • Michael Higgins wins 56% of votes and re-elected as Irish president
  • Italian government to step in if a crisis in the banking sector occurred
  • Crude oil continues to drop, declining around 12% and working on its worst month since 2016
  • Shanghai composite and Shenzhen composite falling by 0.95% and 0.83% in this mornings trade, whereas, the Nikkei 225 increases by over 1% and ASX 200 by 0.98%
  • SIT Investment Associate’s warns that the bond market could surge on spiking interest rates

Asian overnight: Another bearish session overnight saw losses across the majority of markets, with Chinese stocks hit hardest after the Shenzhen composite dropped 3%. The technology sector was once again targeted by sellers, with Japanese markets being impacted by a significant selloff. We also saw Japanese retail trade data fall from 2.7% to 2.1%

UK, US and Europe: Looking ahead, a somewhat quiet economic calendar sees a focus on US data, where personal spending and the core PCE price index data should provide some form of volatility for dollar volatility.

The government is to reconsider a new budget plan if a Brexit deal with the EU does not come into plan. Mr Hammond explains that the original budget forecast was based on an “average-type free trade deal”, therefore if the UK leaves without an agreement, this could change. The forecasted budget is pressured to add extra funds for the universal credit rollout, after claims that millions of households could potentially lose money under the new system. It also has plans to release expected budgets of around £30billion for roads in England, £900million in business rates and £650million to rejuvenate high streets, as well as an increase of £2billion on mental health services and another freeze in fuel duty.

South Africa: Commodity prices are trading mostly lower this morning, while the dollar remains firm. The rand is weaker against the majors. Tencent Holdings is down 1% in Asia, suggestive of a softer start for major holding company Naspers. BHP Billiton is trading 1.4% higher in Australia this morning, suggestive of a higher start for local resource counters. 

Economic calendar - key events and forecast (times in BST)

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Source: Daily FX Economic Calendar

12.30pm – US personal income & spending (September): income to rise 0.3% MoM and spending to rise 0.4% MoM. Market to watch: USD crosses

11.30pm – Japan unemployment (September): rate to rise to 2.5% from 2.4%. Market to watch: JPY crosses

Corporate News, Upgrades and Downgrades

  • HSBC posted better than expected profits in Q3, following a reduction in costs, with adjusted pre-tax profits coming in at $6.19 billion (up 16%). The ability to rein in costs is positive going forward, with operating expenses falling 6.9% to $7.97 billion over the period.  
  • Ford’s production line in Bridgend to close from the 29th October to 2nd November
  • Asda to potentially cut up to 25,000 jobs as they begin consultations with staff in regards to job roles and working hours
  • Hitachi shares decline around 8% as its Chemical Co enters its second falsification scandal this year
  • Barclays to not face trial over its emergency fundraising from Qatar in 2008 financial crisis
  • MTN Group For the quarter ending 30 September 2018, group service revenue increased by 10,0% y/y  and group data revenue increased by 23,9% y/y. 
  • Raubex Group Ltd for the interim period, revenue decreased by 4% and headline earnings per share decreased by 72.8% 
  • Famous Brands for the interim period, revenue increased by 5.4% and headline earnings per share by 10.6%

Royal Gold Downgraded by Zacks Investment Research to Strong Sell

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