European markets opened higher this morning after Asia markets rebounded on the back of verbal intervention from Chinese regulators and policymakers, reassuring investors that despite a slowdown in the Chinese economy, they were introducing a series of measures to help the markets.
The late rebound came about despite a weaker than expected Chinese Q3 GDP number which came in at its lowest level since early 2009 at 6.5%. There was further weakness in the September industrial production numbers which came in at its lowest level since April 2015 at 5.8%. Retail sales were slightly more encouraging, rising 9.2%, an improvement on the August numbers. Despite today’s rebound Chinese markets still finished the week lower and posted their lowest close since 2014.
European markets have been able to benefit from the Asia rebound, opening higher at the end of a similarly difficult week, with Italian markets in particular looking set to post their fourth consecutive weekly loss, as the row over the new government’s budget hits sentiment and sends Italian yields to their highest levels since 2014. The Italian 10 year yield has pushed above 3.7%, while the 7 year yield is approaching 3.5%, a five year high.
Other European markets in the meantime have chopped around near to their recent lows, their upside limited to some extent by events in Italy and the impasse over the Irish border between the EU and the UK government.
In company news it’s a big day for hotels with Accor (PA:ACCP) and InterContinental Hotels (LON:IHG) updating the markets. Accor, who own Ibis, Swissotel and Sofitel brands reported that (RevPar) revenue per room increased by 5.9%, up from 4.3% expected, while raising its guidance.
InterContinental Hotels, owners of Holiday Inn and Crowne Plaza also showed decent increases in Q3 (RevPar) of 2.5% across EMEA with year to date (RevPar) of 2.7%, along with a special dividend of $500m. The only downside was a slowdown in the US where revenue per room was flat, probably due to hurricane related factors, while China revenue rose 4.8%. Investors appear to have been underwhelmed by the update with the stock opening lower and at one year lows.
The London Stock Exchange (LON:LSE) also disappointed investors with a Q3 update that saw revenues come in 3% below expectations. Revenues were still higher on the previous quarter but due to a £9m accounting charge fell short of consensus. New CEO David Schwimmer also announced that they would be acquiring another 15.1% stake in clearing house LCH Group for $438m, taking the majority ownership to over 80%.
In signs that the slowdown in car sales is having an effect down the supply chain, tyre maker Michelin (PA:MICP) has dropped sharply after reporting of a drop in demand in both China and Europe, as new car sales slowed and warned about the outlook for Q4. German tyre maker Continental shares also dropped in sympathy.
The pound appears to be putting aside concerns about the parlous state of the Brexit talks to be trading slightly higher ahead of today’s latest public sector borrowing numbers.
US closed sharply lower yesterday reversing most of the rally seen earlier this week, as the worries that prompted last week’s selloff returned in the aftermath of the latest Fed minutes, with tech stocks leading the declines and the small cap Russell 2000 falling into correction territory.
On the earnings front we get the latest Q1 numbers from Procter & Gamble (NYSE:PG), while bank earnings continues with the latest Q3 numbers from State Street. Data wise we have the latest existing home sales numbers for September and in a time of rising mortgage rates the expectation is that we’ll probably see another decline with an expectation of a move lower of -0.9%.
Dow Jones is expected to open 71 points higher at 25,450
S&P500 is expected to open 9 points higher at 2,777
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