After some big moves yesterday, the markets are relatively sanguine this morning with the FTSE100 and GBP/USD little changed. With the news that the FBI have cleared Hillary Clinton once again of any wrongdoing in their latest email probe as well as the strong support for the Democrat nominee in early voting - particularly noticeable in the key swing state of Florida - Monday’s moves may have offered a sneak peek as to how the markets would react to Mrs. Clinton prevailing in the race for the White House.
Stocks to rally on Clinton win?
Yesterday saw a strong risk-on appetite in markets around the globe with stocks rallying alongside the US dollar and safe-haven assets such as gold falling lower. The news developments surrounding Hillary Clinton were undoubtedly seen as a positive for her campaign and along these lines yesterday’s price action could well be repeated overnight and tomorrow should the Democrat become the 45th President of the United States.
How much of a potential relief rally is already “priced-in” is difficult to say, but the level of complacency seems less than that which surrounding the EU referendum and a surprise result for Trump may not be quite as big a shock to the markets as the victory for “leave” was on the 24th June. As far as traders placing large bets before a major macro event is concerned we may be seeing a case now of once bitten, twice shy. Having said that, with the result of the election likely to become apparent before the London Stock Exchange opens tomorrow there is the potential for some large overnight gaps in stocks.
UK industrial production falls but manufacturing rises
With the US election result likely to be the biggest driver of UK assets this week, this morning has seen the biggest data release from a domestic perspective and it paints a mixed bag for the UK economy. Industrial production fell 0.4% between August and September with the size of the drop matching the same decline seen in the previous month. The biggest downward pressure came from the manufacturing industry which fell by 0.9% in the quarter. Seemingly paradoxically at the same time manufacturing output in September rose more than expected at 0.6%. This disparity can be explained by the sharp drop seen in manufacturing PMI in July following the EU referendum which subsequently recovered after the industry began to benefit from the weak pound.
Marks & Spencer (LON:MKS) drops after releasing latest results
The latest trading update for M&S looks pretty poor on the face of it and despite the fall in underlying profits coming in slightly smaller than a consensus amongst analysts' estimates, it still represents a decline of more than 18% compared to the same period last year. Higher than expected exceptional costs of £206.2m, largely due to a significant charge relating to pension changes, is arguably the worst piece of news in the release with CEO Steven Rowe clearly trying to solve unwanted problems that begun well before his tenure as part of a strategic review after recent poor performance.
Whilst these results are clearly far from stellar, they should be viewed in the context of lowered expectations, with the share price slumping by more than a third in the past 12 months. The decision to maintain the interim dividend of 6.8p may offer some solace to long-suffering shareholders and with the stock managing to achieve an upwards trajectory over the past quarter, investors will hope that the worst is behind them and that bluer skies lie ahead.