Stocks are firmly in the red as investors are worried about rising US government bond yields, emerging market economies, and Italy’s political situation. The rise in US yields could put additional pressure on emerging economies, and the US non-farm payrolls report later today could drive yields even higher if we see a positive update.
The Italian government are holding their nerve and are determined to disobey Brussels, and pursue increased government spending in a bid to boost economic activity. The political rumbling regarding Italy might spark another round of the Italian debt crisis.
Intu Properties (LON:INTUP) shares have soared this morning after it was reported that a consortium including John Whittaker of Peel Group are considering a bid for the company. Earlier this year Klepierre and Hammerson expressed an interest in Intu properties but both potential suitors walked away. There has been a lot of talk about consolidation in the real estate investment trust industry recently, but retail centres are under major pressure from the rise of e-commerce. Intu’s valuation has dropped 85% in 12 years, and the company might be relatively cheap, but it is relatively cheap for a reason. Land Securities (LON:LAND) and British Land (LON:BLND) are higher this morning too due to the speculation about a takeover of Intu.
Mining stocks like Antofagasta (LON:ANTO), BHP Billiton (LON:BLT), Rio Tinto (LON:RIO) and Glencore (LON:GLEN) are lower today after there was a large sell-off in copper. Tensions between the US and China have risen in light of a report yesterday that claimed that chips discovered in Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) products were used by the Chinese authorities for surveillance. Traders are fearful President Trump could slap more tariffs on Chinese imports, which could further slowdown the Chinese economy.
GBP/USD is higher again as traders remain a little optimistic about the UK and Brussels reaching a deal. Yesterday it was reported the Theresa May is considering an all-UK customs union with the EU, and the Irish government are keen for such a proposal. According to Halifax, UK average house price grew by 2.5% in the three months until September, which was below the forecast of 3.3%, but the announcement had little impact of the currency pair.
EUR/USD is lower as traders look ahead to the US jobs report. German PPI grew by 3.1% in August, which topped the forecast of 2.9%. A firm PPI update indicates demand is strong and we could see higher CPI in the medium term.
At 1.30pm (UK time) the US non-farm payrolls report will be released, and the consensus estimate is for 184,000 jobs to have been added in September, and that compares with the 201,000 that were added in August. The unemployment rate is anticipated to fall to 3.8% from 3.9%, while yearly average earnings are tipped to slip back to 2.8% from 2.9%. The earnings component will be of particular importance, and US workers who earn more are likely to spend more, and keep the economy buoyant.
We are expecting the Dow Jones to open 17 points lower at 26,610 and we are calling the S&P 500 down 1 point at 2,900.
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