UK & Europe
Energy and other commodity-related sectors led European stocks higher on Thursday after OPEC reached some form of understanding on an oil production cut. The proposed deal should keep a floor under oil prices until OPEC’s official meeting in November when the details will be ironed out.
Shares of oil majors Royal Dutch Shell (LON:RDSa) and BP (LON:BP) were top risers on the FTSE 100, offsetting a dramatic slump in the shares of Capita after the outsourcing firm revised lower its sales forecasts.
Capita share dropped over 25% after the firm revised down its full-year sales forecast in the region of 12%, in signs of an unexpectedly rapid slowdown. The uncertainty surrounding a legal dispute with Co-Op Bank over the administration of it mortgages and additional costs from a delayed IT project are at the centre of the forecast downgrade.
Merlin Entertainments shares dropped 4% following a trading update. Shares were already under pressure this week following a £5m fine for last’s years Smiler ride accident. Revenues are up over the year but the company warned “security concerns” were still dragging on visitation at its parks and attractions.
Shares of Imagination Technologies slipped on Thursday after the UK software firm sold its loss-making Pure digital radio business to Australian firm Aventure. Imagination Tech won’t be sad to see the back of a unit that lost it £7.9m last year, but the price tag, which doesn’t include any debt, is probably not all shareholders could have hoped for.
US
Stocks in the US opened lower as the rise in oil price stalled amid scepticism the OPEC deal could get done in the manner agreed.
Shares of Wells Fargo (NYSE:WFC) were in focus with CEO John Stump in the hot seat again on Capitol Hill, defending his role in the false account scandal at the bank where he is both Chief Executive and Chairman. Lawmakers seem justifiably sceptical of Stumpf claiming there was no orchestrated scheme to defraud clients. Mr Stumpf’s claims are in contrast to a suit filed by ex-employees claiming they were fired for trying to raise concerns over the issue. It looks like Stumpf is taking the political flak now to allow his successor a clean walk in.
FX
It was all quiet on the forex front ahead of speeches from Fed officials. That is aside from a drop in the value of the Japanese yen after data showed ongoing weakness in Japan’s retail sector. Japanese retail sales fell for a sixth month in a row, dropping -2.1% year-over-year, worse than the -1.7% y/y drop expected.
US GDP data came in slightly ahead of expectations but had little impact on the dollar. The weakness in the more current data is what will really dictate Fed policy. Data showed a -0.2% annual decline in pending home sales.
Commodities
Commodity prices flat-lined on Thursday the day following the OPEC-induced oil price surge.
After a 6% surge yesterday, it’s understandable to see some profit-taking in oil markets as a little scepticism creeps in over the workability of the deal. Cutting output by 700k barrels a day is all well and good, but how that cut is going to be divided up across the producing nations is where consensus could quickly unravel.
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