UK & Europe
European shares trimmed earlier gains on Wednesday after having risen to a fresh two and-a-half month high in early trading. The Euro Stoxx 50 traded as high as 3,472 Wednesday morning, its highest since August 19.
Another hint of further monetary stimulus from ECB president Mario Draghi at a European cultural event in Frankfurt got markets excited. Mr Draghi reiterated that the level of monetary accommodation will be reviewed in December while emphasising that the governing council is willing and able to use all instruments at its disposal.
Some of the gains were spurned as uncertainty set in again over the likely timing of an interest rate rise in the United States after a very strong service sector report.
Germany’s benchmarked DAX index underperformed thanks to a 7% decline in Volkswagen (DE:VOWG) shares. The carmaker has announced some irregularities in CO2 emissions and fuel consumption claims in its petrol engines. Not only is the size of legal penalties likely to be higher after this latest revelation but the associated rise in driver mistrust of VW could really bite into sales.
UK stocks rose to a four-day high on Wednesday driven by well-received results from Marks and Spencer Group (L:MKS) and a strong day for the basic resources sector. The FTSE 100 reached 6,459, its highest since October 23. The index continues to trade sideways between 6,300 and 6,500.
Marks and Spencer (L:MKS) was a top riser on the UK benchmark after sales declined less than expected in the first half of the year. M&S shares broke to a two-month high after investors reacted positively to the retailer’s refusal to discount its clothing lines which prompted a drop in revenues but a rise in profits. Still, top and bottom line earnings are still well down on the same period last year. The website fault last week that allowed M&S customers to see each other’s details was a worrying sign that the retailer is still struggling to get the basics right.
US
US stocks were trading flat on Wednesday with the Dow Jones giving back small early gains that took it to its highest level since July 21, just shy of 18,000. This week’s rally looks on shaky ground after a very strong service sector report put a December rate hike back on the table at the same time Fed Chair Yellen was testifying on Capitol Hill.
Shares of Tesla Motors Inc (O:TSLA) opened up 10% higher after a well-received third-quarter earnings report. CEO Elon Musk reiterated 50k+ vehicle deliveries this year on the back of sales of its new SUV ‘Model X’. Having delivered 33,157 cars in the first three quarters, Tesla will need to deliver 16,843 cars this quarter, well up from the 11,580 in Q3. That’s a big ask and could create some fireworks if Tesla fails to deliver.
Groupon shares crashed 30% in early trading after the deals-site missed sales estimates and issued weak guidance for the fourth quarter.
FX
The second strongest ISM non-manufacturing number in 10 years contributed to a surge higher in the US dollar on Wednesday. ADP private payrolls data came in line with expectations while the trade deficit declined more than expected in September. EUR/USD slid to the lowest since August 7 while GBP/USD dipped back below 1.54.
The pound rose against the euro after the UK services PMI improved more than expected in October while the equivalent Eurozone data showed a surprise slowdown in services. Eurozone producer prices declined slightly less than expected. EUR/GBP fell to the lowest since August 19.
Commodities
Gold fell for a sixth day running on Wednesday. Downside momentum slowed from the crash seen on Tuesday but the lack of even a small recovery suggests sentiment has turned very bearish.
Crude oil stocks rose less than expected in the past week, helping oil prices retrace early losses and break back into positive territory.
DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.