Europe
European markets appear to be pausing for breath after the downs and ups at the start of the week, with the DAX and FTSE100 trying to push higher, while the CAC 40 has struggled due to weakness in the luxury sector after a profits warning from LVMH.
Luxury goods brand LVMH has fallen to its lowest levels since December last year after reporting a softening of demand in its Q3 numbers released last night. While revenue saw an increase of 9%, expectations had been for a rise of 11.9%, with sales in its Asia markets falling short of forecasts. Q3 revenues came in at €19.96bn an increase of 1.1%, however there were sharp declines in revenues in the wine and spirits division, which fell 21%, while watches and jewellery revenue fell by 5.3%.
This underwhelming update has seen the likes of Burberry, Richemont and Hermes all slide back as well over concern that this weakness could be a sign of things to come for the sector.
Energy has been a laggard along with oil prices which is weighing on the FTSE100, although it is being helped on the other side of the ledger by resilience in defensives, with the likes of Imperial Brands, BAE Systems and Utilities.
It’s also been a poor day for the construction sector with Howden Joinery and Kingfisher on the slide after sector peer Travis Perkins reported a surprise decline in Q3 revenue of -1.8% and issued a profits warning.
The key area of weakness was in the building merchant’s business which saw revenues slump by 3.4%, due to discounting on goods and lower raw materials prices, even as volumes slipped by 0.3%. The Toolstation business has managed to outperform, with volumes and revenues both rising. Nonetheless Travis Perkins downgraded their expectations for full year adjusted operating profit to between £175m and £195m.
Next shares are also lower along with the rest of UK retail, with reports circulating that it’s looking to close a deal for Fat Face for around £100m, as it continues to vie with Mike Ashley’s Frasers Group in cementing its position near the top of the general merchandise food chain in UK retail. Fat Face currently sells its brands on the Marks & Spencer website which means any deal with Next will mean that will probably end.
US
US markets opened higher despite PPI inflation unexpectedly popping higher in September. Headline PPI rose by 2.2% while August was revised higher to 2% from 1.6%, with most of the gain driven by higher energy prices.
Core prices were also a touch firmer rising to 2.7% from 2.5%, serving to push 2-year yields sharply off their lows of the day, even as 10-year yields remained near their lows of the day. As a forward-looking indicator this isn’t encouraging for CPI tomorrow, however for now markets appear to be shrugging it off ahead of the release of tonight’s Fed minutes.
Exxon Mobil shares have slipped back after confirming that it has agreed a deal with Pioneer Natural Resources for $59.5bn, paying $253 a share in the process, giving it a strong position as the one of the major operators in the Permian Basin, giving it a 15% of the regions total output.
All eyes will be on Birkenstock later today as the German shoe manufacturer makes its debut later today, at $46 a share.
FX
The currency reaction to the unexpected increase in PPI inflation has been interesting in that it hasn’t given a lift to the US dollar, suggesting that markets think it’s likely to be temporary. What we have seen is that short rates have pushed higher, while longer term rates have remained soft.
This appears to suggest that investors think that while another rate rise may well be coming, we’re pretty much near the top in the longer term.
The pound has edged higher despite a sharp decline in gilt yields and Goldman Sachs cutting its UK inflation forecast for 2023 and 2024. On the face of it while it could be construed as a negative for sterling it’s likely to be a good thing for the UK economy, as it could imply that the weak GDP forecast from the IMF yesterday is too pessimistic and once again the UK economy could do better than expected. It certainly wouldn’t be the first time that the IMF has been wrong.
Commodities
Crude oil prices look set to fall for the second day in a row after their Monday spike higher as concerns about possible disruption to supplies continue to recede, with Israel’s efforts contained for the time being to the Gaza region.
Natural Gas prices appear to have hit a short-term top after 2 days of strong gains, slipping back from 4-month highs as talks resumed between Australian LNG workers and Chevron set to resume tomorrow.
Gold prices have continued to edge higher, against a backdrop of several Fed members who have suggested that rates may well be restrictive enough, and that we might have seen the top in the short term when it comes to rate hikes.
Volatility
CMC’s proprietary basket of renewable energy stocks continued to find favour on Tuesday, reversing last week’s losses. The key driver here seems to be that fall in bond yields, as debt financing underpins financial models for many operating in this sector, as well as the more obvious energy security question which have resurfaced in the wake of the unfolding situation in Israel. One day vol on the basket sat at 60.33% against 45.54% for the month.
It was comments from the President of the Dallas Federal Reserve that predicated that fall in bond yields, following suggestions that rates in the US had now peaked. That’s offering some relief for the commercial banking sector too as it may help stem the rising number of defaults being seen. As a result, CMC’s basket of US bank stocks also had a good day with the underlying adding around two percent before giving back a little of the upside. In addition, talk of a possible disposal by Truist – one of the larger constituents – served to boost upside further. One day vol on the basket printed 38.54% against 36.05% for the month.
Dollar weakness also played into the hands of Palladium, driving the underlying some four percent higher on the day. The precious metal had been trading around five year lows but again a renewed desire to move away from a reliance on fossil fuels plus better financing terms for green tech businesses could continue to lend support here. One day vol stood at 45.46% against 38.56% for the month.
Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
AUD/USD: Next upside target comes at 0.6550
AUD/USD managed well to shrug off the marked advance in the Greenback as well as geopolitical tensions, regaining the area above the 0.6500 hurdle ahead of preliminary PMIs in Australia.
EUR/USD: Further losses now look at 1.0450
Further strength in the US Dollar kept the price action in the risk-associated assets depressed, sending EUR/USD back to the 1.0460 region for the first time since early October 2023 prior to key releases in the real economy.
Gold faces extra upside near term
Gold extends its bullish momentum further above $2,660 on Thursday. XAU/USD rises for the fourth straight day, sponsored by geopolitical risks stemming from the worsening Russia-Ukraine war. Markets await comments from Fed policymakers.
Ethereum Price Forecast: ETH open interest surge to all-time high after recent price rally
Ethereum (ETH) is trading near $3,350, experiencing an 10% increase on Thursday. This price surge is attributed to strong bullish sentiment among derivatives traders, driving its open interest above $20 billion for the first time.
A new horizon: The economic outlook in a new leadership and policy era
The economic aftershocks of the COVID pandemic, which have dominated the economic landscape over the past few years, are steadily dissipating. These pandemic-induced economic effects are set to be largely supplanted by economic policy changes that are on the horizon in the United States.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.