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Global Stocks Rebound After Worst Month Since 2012 - EMEA Brief 01 Nov

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JoeIG

  • Global stocks rebound after worst month since 2012. Corporate earnings in the US and Europe have helped ease lingering worries over rising interest rates, trade tensions and a slowing global economy.
  • The S&P 500 rose 1.1% and the Nasdaq Composite gained 2%. The Dow is currently trading flat after jumping more than 350 points at yesterday’s open.
  • Asia-Pacific Indices mostly started November on a stronger footing. The Hang Seng was 1.8% higher and Taiwan’s Taiex gained 0.4%, however, Topix was down 0.5% whilst the ASX was roughly flat.
  • The pound sterling rose by almost 0.7% following a report that Theresa May had negotiated an agreement for British financial services companies to maintain continued access to European markets after Brexit. Dominic Raab also predicts a Brexit deal to be made by November 21st. 
  • A series of UK economic releases are due today, including: the Manufacturing PMI, a summary of Monetary Policy, and the all important BOE Inflation Report, providing a projection of inflation and economic growth over the next 2 years.
  • The AUD rose 0.95% against the USD after a better than expected trade surplus in September as exports rose and imports fell. AUD/USD currently at 0.714.
  • Turkish Lira drops as the country’s finance minister announced tax cuts that led to doubts over the government’s pledge to take a more disciplined fiscal approach.
  • Brent crude continues its decline, down 0.44% and currently trading at $74.74 a barrel, .
  • Gold is up 0.71% at around $1224 an ounce.

Asian overnight: Chinese stocks rose on Thursday on the back of a signalling of a new round of economic stimulus measures by Chinese Communist leaders, in hopes to shore up confidence as the country faces slower growth and the US-China trade war. This comes as an official gauge of Chinese factory output (PMI) weakened to its lowest level in more than two years in October, indicating pressure on the economy.

Japanese markets provided the one outlier to an overwhelmingly positive session in China, Hong Kong and Australia. Tax cuts and other stimulus from the Chinese helped boost confidence, while the bullish theme from US and European markets also helped. Rumours of a deal between the UK and EU that would see services firms throughout the UK retain access to European markets has helped provide a boost for the pound. Meanwhile, data-wise we have seen a massive jump in the Australian trade balance, which posted the largest surplus in 18-months. A sharp rise in commodity prices also helped boost Australian stocks and the Australian dollar. 

UK, US and Europe: There are a few key UK monetary and economic releases to watch out for today. The BOE inflation report is set to provide an insight into the bank’s view of economic conditions and inflation, an outlook for the country’s economic growth which will shape future monetary policy. Mark Carney is due to speak at a press conference at 1:30pm GMT regarding the report – expect volatility around this time. The BOE interest rate will also be released, with a forecast of 0.75%, unchanged from last month’s figure.

In the afternoon, keep an eye out for the manufacturing PMI readings from both the US and Canada. On the corporate front, keep an eye out for earnings from Apple as the tech sector comes into focus once again.

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

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Source: Daily FX Economic Calendar

9.30am – UK mfg PMI (October): activity expected to increase in the sector, with the inde rising to 54.6 from 53.8. Markets to watch: GBP crosses

12pm – BoE meeting & inflation report: no change on policy expected, but the inflation report may provide some clues and thus result in some GBP volatility. Markets to watch: GBP crosses

2pm – US ISM mfg PMI (October): index to fall to 59.6 from 59.8. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • Just Eat has issued a profit warning, saying that earnings will be towards the bottom end of the £165 - £185 million range, due to investments in Latin America, although revenues will be towards the top end of the £740 – 770 million range. 
  • Carpetright reported ‘negative’ like-for-like sales for the half year to 31 October, hit by store closures and disruption arising from restructuring. 
  • Credit Suisse’s net income for Q3 comes in at 424 million CHF, vs. 449 million expected.
  • Royal Dutch Shell reported an almost 40% rise in Q3 profits, making four-year highs but still short of forecasts.
  • Japanese electronics giant Panasonic saw its share prices drop more than 8% after a report of a 4% fall in half yearly profit.

HSBC upgraded to hold at DZ Bank
Paradox Interactive raised to buy at SEB Equities
Sanofi upgraded to equal-weight at Barclays
Securitas upgraded to add at AlphaValue

BNP Paribas cut to hold at Independent Research;
GBL downgraded to hold at SocGen
IMA downgraded to hold at Kepler Cheuvreux
Outokumpu downgraded to neutral at Citi

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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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