Stock Market News (US Open) – European equities not much changed; FTSE hurt by rising sterling; US opens lower

Stock Market News (US Open) – European equities not much changed; FTSE hurt by rising sterling; US opens lower

Andreas Georgiou, XM Investment Research Desk

Not long before European traders head home for the day, the pan-European Stoxx 600 was marginally down on the day but not far away from the 10-week high of 386.31 that was recorded yesterday.

The FTSE was 0.2% lower, with the DAX and CAC 40 up by 0.3% and 0.1% respectively. The UK blue-chip index posted losses after Michel Barnier, the EU’s chief negotiator for Brexit, made some comments that boosted the British currency. Among others, he remarked that this week’s talks between Britain and the EU were “constructive”. FTSE constituents make a significant proportion of their revenues from overseas markets and tend to decline whenever the pound rises.

Stoxx 600 Banks reversed gains from morning trading to last trade only marginally up on the day. Yesterday the sub-index rose by an impressive 2.0%, while earlier today it touched its highest since early August. Deutsche Bank (up 3.1%) remained the sub-index’s top gainer, with the German bank also being supported by Moody’s decision to maintain its stable outlook for German banks on the back of resilient economic growth in the country. Barclays (up 1.2%) and Société Générale (up 0.6%) were other notable gainers within Stoxx 600 Banks.

SSP Group (up 6.5%), the UK-based food travel company, and H&M (down 5.5%), the known fashion group, remained the Stoxx 600’s top gainer and worst underperformer. The former’s upbeat full-year revenue guidance helped its stock price rally, while H&M reported a 20% decline in third quarter pretax profit and experienced sharply lower margins in its efforts to move piled-up unsold garments.

In broker-induced moves, UK-based multinational infrastructure group and mid-cap stock Balfour Beatty (up 3.9%) made the list of Stoxx 600 top performing stocks after Peel Hunt upgraded the company to “buy” and raised its price target for the firm. French-based clinics operator Orpea SA (down 1.8%) declined after analysts at Société Générale downgraded its stock to “hold” from “buy”.

It is interesting that according to I/B/E/S (Institutional Brokers’ Estimate System) estimates, European company earnings are anticipated to grow by 13.6% in the third quarter, outpacing by more than a twofold the S&P 500’s 6.2% and rendering themselves relatively attractive from a P/E perspective.

At the opening bell, the Dow Jones Industrial Average, S&P 500 and Nasdaq Composite were all down by 0.1%, 0.1% and 0.25% respectively. Earlier in the day, US second quarter GDP was revised to 3.1% from the previously reported 3.0%, though weekly jobless claims rose by more than analysts anticipated.

The Trump administration’s plans to deliver the biggest tax overhaul in decades are expected to continue attracting attention further ahead.

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