Europe
Stocks have sold-off as traders are fearful about the possibility of a no-deal Brexit. Boris Johnson is keen to introduce legislation that will ensure the transition period will not be extended, which would allow the possibility of no-deal scenario. In London, banks and house builders are some of the biggest fallers are they would be in the no-deal Brexit firing line.
The possibility of the UK leaving the EU without a deal would be after the transition period in December 2020, so dealers are not overly worried right now. European equity markets saw impressive gains recently, so today’s move is just a bit of profit taking. It is possible the losses on the FTSE 100 are being cushioned by the major fall in the pound, but then again the losses on the DAX and the CAC 40 aren’t excessive.
Unilever PLC (LON:ULVR) shares are in the red this afternoon after the company said its annual sale growth will fall below the 3-5% range the company was projecting. The consumer goods giant cited softer trading in Africa as well as slowdown in economic growth in Asia for the lowering of the guidance. The update is disappointing but it’s not anything to get overly worried about seeing as many regions of the world are undergoing slower growth. The stock price has been in decline since September so it appears that traders were expecting some sort of slowdown.
Trainline PLC (LON:TRNT) revealed solid nine-month figures. On a year-on-year basis, group revenue increased by 26%, while UK consumer net ticket sales rose by 24%. The group confirmed it will continue to invest in the UK and international business, and that it is on course to deliver ‘significant growth opportunities’ in the year ahead. Today’s numbers are nice continuation from the fact the group raised its full-year guidance in the second-quarter.
Petrofac Ltd (LON:PFC) shares are down today after the group issued a cautious trading update. The company confirmed the backlog currently stands at $7.4 billion, while this time last year it stood at $9.6 billion. The group expects full-year revenue to fall by more than 5% on account of delays in the bidding process. The group was caught up in a bribery scandal in the Middle East, which has damaged the firm’s reputation. The underlying energy market has been pushing higher recently, but oil is cheap compared with previous years so Petrofac’s services might not be in high demand in the medium-term.
US
The S&P 500 eked out another record-high as the mood on Wall Street is still optimistic on the back of the US-China trade story. The US housing market continues to be in good health. The latest housing permits reading was 1.48 million – a new 12 year high. The housing starts reading ticked up to 1.37 million, also a 12 year high. Keep in mind, the Fed cut rates three times between June and October, which should assist the housing market in the months to come.
Last night, Boeing (NYSE:BA) confirmed they will suspend the production of the 737 Max plane next year. During the trading day yesterday, it was reported the group were considering halting production, and now it is official. The aircraft in question has been at the centre of a couple of catastrophic crashes, and it’s hardly a shock the decision to stop production has been taken.
Navistar (NYSE:NAV) revealed mixed fourth-quarter figures. EPS came in $1.02, topping the consensus estimate of 96 cents. Revenue for the three month period was $2.8 billion, and that marginally exceeded forecasts. The firm lowered its full-year 2020 revenue guidance to $9.25 billion, from $9.75 billion, and traders focused on that, hence why the stock is in the red.
FX
GBP/USD has been hit hard by profit taking over the fears surrounding the possibility of a no-deal Brexit post the transition period. The currency pair is now below the pre-exit poll level, as traders are dumping the pound. When it comes to the fear of a no-deal Brexit, the currency markets are more rattled than stock markets.
As lack of major economic news from the eurozone has brought about low volatility in EUR/USD. The greenback has been pushed higher by the slump in sterling, but the movement against the single currency has been muted. Since the end of last month, the currency pair has been pushing higher, and should that continue it might target 1.1179.
Commodities
Gold has barely moved today, which is impressive, seeing as the US dollar index is slightly higher, and US equities are at record levels. The commodity usually gets driven lower whenever the US dollar gets pushed higher, but today it is holding its own. The wider bearish move since September can’t be ignored, and while it holds below the 50-day moving average at $1,478, the negative trend should stay intact.
Oil is higher on the back of the bullish sentiment surrounding the US-China trade situation. The commodity is a good barometer for the perceived health of the global economy, and WTI plus Brent crude are in demand as positive US-China trading relations should bode well for future demand.
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