Stocks Move Higher As Fears Ease

Europe

Stocks are in positive territory heading into the close as some market confidence has been restored. The FTSE 100 and DAX 30 have underperformed, when compared with the CAC 40 and the FTSE MIB. Given the size of the gains made in the UK and Germany, investors are not overly confident the wider sell-off is over.

Lloyds (LON:LLOY) shares are in demand after the bank revealed a third-quarter pre-tax profit of £1.8 billion, which topped the £1.7 billion forecast that analysts were expecting. The bank announced that pre-tax earnings for nine months jumped by 10%, and costs slipped by 3%. Lloyds confirmed their full-year guidance too. The bank confirmed a slight increase in the net interest margin, and the capital ratio is robust. Lloyds are trying to branch out into other areas of financial services like wealth management, insurance and car finance, and a more diversified business model will reduce its reliance on the UK mortgage market. The stock has been drifting lower since May 2017, and if the bearish move continues, it could target 55p.

UBS (NYSE:UBS) announced that third-quarter net profit jumped by 32% to CHF1.246 billion, which comfortably topped the CHF1.01 billion forecast that analysts were expecting. The results were helped by the investment banking division which registered a 44% jump in operating profit before tax. The asset management division had a solid performance too. The bank stated the recent volatility in the financial markets was ‘generally positive’ for the business, but cautioned about global trade tensions.

Debenhams (LON:DEB) shares have popped after the company revealed plans to step-up its store closures. The retailer now expects to close up to 50 stores, whereby it previously planned to only shut 10. The group registered a loss of £512.4 million, but when you strip out write-downs, the pre-tax profit was £33 million. The firm has been struggling for years, but the aggressive restructuring scheme has lifted investor sentiment.

US

Stocks have rebounded as solid corporate earnings and a lack of negative news prompted dealers to snap up cheap stocks. The mood has lightened on Wall Street, but we have seen bounce backs before, and seeing as interest rate hike fears, and geopolitical tensions still persist, the upward move may not last.

The US goods trade deficit hit $76.04 billion – a record high. This will anger President Trump as the whole point of the various trade spats was to rebalance the US’s trading relationship with the rest of the world. The trade gap is getting wider, and this could encourage Mr Trump to introduce further tariffs.

In September, US durable goods orders grew by 0.8%, which easily topped the 1% decline that investors were expecting. The previous report was revised higher from 4.4% to 4.6%. Jobless claims ticked up to 215,000, from 210,000. The rate is not too far from a multi-decade low. The economic indicators are likely to keep the Federal Reserve’s monetary tightening policy on track.

Twitter (NYSE:TWTR) posted impressive third-quarter results. Earnings per share (EPS) were 21 cents, and the consensus estimate was 14 cents per share. Advertising revenue increased by 29%. Monthly active users fell as the social media company has a campaign to remove bot accounts, which will be positive for the group in the long-term. Daily active users rose by 9% on the quarter.

Comcast (NASDAQ:CMCSA) confirmed that EPS and revenue were 65 cents and $22.13 billion respectively, and both metrics topped analysts’ expectations. Video customers fell, but the decline was less than expected.

FX

EUR/USD is largely flat after the uneventful ECB meeting. Interest rates were left unchanged, as expected, and the central bank hopes to wind down the bond buying scheme this year. Mario Draghi, the head of the ECB, acknowledged the region is experiencing lower economic momentum but stressed it is not a downturn. The Italian situation could be a major problem for the ECB, but Mr Draghi is confident an agreement can be found.

GBP/USD has been hurt by the firmer US dollar. Prime Minister May is said to have had a positive meeting with the 1922 committee yesterday, but that has only slightly reassured traders. Mrs May remains in a tight spot and she probably only dodged a vote of no confidence because there is no obvious candidate to replace her. Uncertainty surrounding Brexit is likely to hang over the pound.

Commodities

Gold is lower today and volatility is low. The commodity has received a boost recently due to the uncertainty surrounding global equity markets. Gold has been broadly moving higher since mid-August, and if the bullish move continues it could target $1265.

Oil is a little higher today following the positive session yesterday. The energy market experienced a surge in volatility recently as mounting US stockpiles and assurances from Saudi Arabia that they won’t curtail output weighed on commodity. The larger-than-expected drop in US gasoline inventories propped up prices yesterday and bargain hunting is factor today.

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