UK & Europe
There were more signs of life on Wednesday as well-received earnings and jump in oil prices helped European shares turn around a two-day losing run to trade higher leading into the Federal Reserve interest rate decision.
Volkswagen (DE:VOWG) shares recovered early losses as investors took heart from the carmaker reaffirming its full-year new car deliveries, raising hope that consumer demand for VW cars will not be as heavily affected by the emissions scandal as had been feared. The shares initially slumped on the headline news that the company had its first quarterly loss in 15 years as the company raised its provision for the emission scandal.
A surge in healthcare stocks, a big rebound in oil prices and well-received results from BT and British American Tobacco (L:BATS) helped the FTSE 100 rise back through 6400 on Wednesday.
Shares of Lloyds (L:LLOY) dropped over 4% following a quarterly decline on the top and bottom line that disappointed investors. The additional £500m provision for PPI claims in the quarter demonstrates the ongoing headache the scandal is causing the bank and explains why management is calling for the proposed deadline for claims to be reduced from two years.
Barclays (L:BARC) shares traded higher following the official announcement of the appointment of new boss Jes Staley. Mr Staley’s appointment was a pretty badly-kept secret in the city and has already been priced into Barclays shares so gains on the day were mostly a reflection of overall market sentiment.
Mr Staley has been brought in to make Barclays’ investment bank less capital intensive whilst at the same time keeping it competitive. MPs are understandably voicing a concern because Mr Staley clearly marks a shift in policy at the bank. As a veteran US investment banker Mr Staley at the helm suggests a shift back towards investment banking and away from the politically palatable commercial/retail bank that was being shaped by former chief Anthony Jenkins.
US
The most successful year ever for Apple, more M&A activity and a recovery in oil prices bolstered the major US stock averages, taking the Dow and S&P back to two-month highs. Trading was otherwise fairly flat ahead of the Federal Reserve meeting in which policy makers are expected to leave rates on hold and possibly signal no rate rise this year.
Apple shares (O:AAPL) rose over 2% as investors reacted positively to better than expected earnings and revenues, 48m iPhones sold and a strong forecast for the holiday season. Results were better than expected but shares still remain down over the past three days after the profit warnings from a number of Apple suppliers suggesting the March quarter may a little weaker than previously thought.
Shares of Twitter (N:TWTR) dived double digits following the weakest quarterly growth in active users since the social network went public. Revenue growth is also slowing, a natural consequence of slow user growth and declining online advertising margins. Still, shares rebounded off the lows on optimism that now permanent CEO Jack Dorsey is the kind of product genius that realise Twitter’s huge potential.
FX
The dollar saw a third day of mixed results on Wednesday with markets not giving any clear sense of direction before tonight’s Fed meeting.
The Swedish krona rose after the Riksbank kept rates on hold but announced an increase in its monthly asset purchases, pre-empting what could be an expansion of QE at the ECB meeting in December.
The euro brushed off a dip in German consumer confidence and a much bigger than expected decline in German import prices, another deflationary indicator, rising against the pound and the dollar on Wednesday. There were some comments from central bankers Peter Praet and Vitor Constancio but the EUR/USD remained stuck in a 1.10-1.11 range before the Fed decision.
The Australian and New Zealand dollar dropped following a weaker than expected Australian CPI. AUD/USD slid nearly 1% to just above 0.71, NZD/USD sits just above 0.67.
Commodities
Oil prices rebounded strongly off two month lows as the build in US crude oil inventories slowed from last week to 3.4m barrels. The data was not confirmed by the API which yesterday reported a bigger than expected build of 4.1m barrels. Overall the US inventories stats are not overly bullish for oil prices but the market got a little overextended to the downside and is seeing a short-squeeze after two-month lows.
Gold and silver jumped higher by over 1% and 2% respectively on expectations of a dovish Fed that could simultaneously increase demand for non-yielding assets and emerging markets, the biggest precious metal consumers.
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