Wall Street closes higher, after a rough month
Be gone, October!
Wall Street has closed for the day, and the month, with a two-day rally.
The Dow and the S&P 500 had both gained around 1% as the closing bell rang. The Nasdaq jumped by 2%, driven by the revival in FAANG stocks.
Slightly worryingly, the rally did soften in the last few minutes (like a chocolate in the warm hand of a trick-or-treater).
Dow closes up 240 points, Nasdaq closes in correction https://t.co/7qxovqoBsq
— CNBC Now (@CNBCnow) October 31, 2018
And the monthly losses are still alarming.
The S&P fell almost 7% in October, its worst month since 2011. The Dow shed 5%, its roughest month since January 2016.
The Nasdaq had a real month to forget, down over 9% in its worst month since November 2008.
Here’s an up-sum of today’s trading in London, from Fiona Cincotta of City Index:
The FTSE rallied for a third straight session on Wednesday despite a stronger pound, jumping 115 points after a dismal October. October is traditionally a difficult month for equities but the FTSE shedding 4.8% is a significantly larger drop than what we would normally expect. How the beginning of November pans out will be interesting. Of the geopolitical issues which have be weighing on the market, namely Brexit, the Italian standoff with Brussels over spending, the US – Sino trade war or the slowing global, none have been resolved and we also have the US mid-term elections thrown into the mix.
Gains were broad based on the FTSE with Standard Chartered a notable riser following impressive results with profits surging 37% on last year. Standard Chartered reported a pre-tax profit of $1.06 billion, up from $774 million a year before and 9% ahead of estimates. By focusing on what is does best – Asia – the bank has managed to sharpen its competitive edge. Costs have been a concern in previous years, but the bank has shown its capabilities at reigning these in.
Next fell following lacklustre results. The bellwether dropped close to 3% after results underwhelmed. The retailer confirmed that in store sales fell further in the third quarter, whilst overall sales grew by 2% thanks to a strong performance in online sales.
Back in New York, tech shares are still on a tear - pushing the Nasdaq up by almost 3% today.
By my maths, that still leaves the Nasdaq down 8% for the month.
Faangs rally on Halloween after frightful October. NSYE FANG Index still 8% down mtd. https://t.co/9jUk0BpuJD pic.twitter.com/A8H64esQ9f
— Holger Zschaepitz (@Schuldensuehner) October 31, 2018
European markets shake off October blues
Good news: October is over, at least for traders in Europe.
Better news: European stock markets have all ended today’s session higher, clawing back some of this month’s losses.
Here’s the closing prices:
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UK’s FTSE 100: UP 92 points or 1.3% at 7,128
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Germany’s DAX: UP 160 points or 1.4% at 11,447
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France’s CAC: UP 51 points of 2.3% at 5,093
That still means European stocks have lost around 5% of their value this month.
Could the worst be over? Possibly, but it’s worth noting that nothing has really changed. All the factors blamed for the sell-off - from US interest rate policy to the Italian budget row - are in place.
On the other hand, maybe there’s relief that the earnings season hasn’t been worse.
Neil Wilson of Markets.com has a good take:
Earnings are not universally strong and outlooks have betrayed some murkiness.
But, on the whole, we have more companies beating earnings estimates than missing, and more than the average. Fundamentals are still strong but there are questions about earnings growth from here.
So, if the US-China trade war pushes prices up (inflationary), and US wage growth picks up (also inflationary), does the Federal Reserve keep hiking? Or does it hold off, to protect asset prices?
Wilson says:
The stock market is telling the Fed to stop raising rates. Janet Yellen has come out to urge the Fed to keep to its course, but the signs are the equity market is highly susceptible to a more aggressive course of hiking. The Fed has been here before – the question is do we get 1998 Greenspan Fed that listens to the equity market, or 2007/08 Bernanke Fed? October was a horrid month despite the gains of the last two days. We could see seasonal factors support further gains into the year-end but the primary trend could remain bearish.”
The Dow is holding onto its gains, now up 286 points (+1.15%) at 25,160 points.
Wall Street traders are doing their best to end October on a positive note. Today’s decent results from GM, and strong ADP jobs figures, seem to be helping.
October’s volatility probably won’t spook the Federal Reserve out of raising US interest rates again in December.
Capital Economics expect Fed chair Jay Powell will pave the way for a pre-Christmas hike, arguing:
Although the Fed is unlikely to make any policy changes at next week’s meeting, we expect the statement to reiterate the FOMC’s plan to continue gradually raising interest rates, with the next move coming in December.
With the latest data showing that activity has continued to expand at a rapid pace, hopes that the recent plunge in the stock market will prompt a ‘Powell put’ are likely to prove misplaced.
The US dollar is also surging today, making gains against emerging market currencies such as the Brazilian real and the Turkish lira.
On a "risk-on" morning with 1-2% gains for US stock indices, #DXY $ index continues to strengthen & sets a high for the year.
— Mohamed A. El-Erian (@elerianm) October 31, 2018
Note also that this Oct, which hasn't been kind to #stocks, DXY is up for the 7th month in a row.
Another reflection of economic and policy divergence. pic.twitter.com/tIZAV11gQW
Netflix up 8.7%
— Carl Quintanilla (@carlquintanilla) October 31, 2018
Facebook up 6.2%
Amazon up 5.8%
Alphabet up 4.4%
Apple up 2.6%
Best day for FAANG in nearly 3 years.@CNBC @SquawkStreet
Why Facebook shares are bouncing back
Last night, Facebook CEO Mark Zuckerberg hailed the company’s ‘Stories’ product as a key future source of growth, and admitted Facebook has reached saturation point in “developed countries”.
Facebook missed analyst forecasts for revenue growth (despite pulling in 33% more than a year ago), but smashed forecasts for earnings.
Wall Street is giving Facebook the thumbs-up today, with Royal Bank of Canada providing a list of five reasons to be bullish:
- Facebook stills owns two of the largest media assets in the world (Facebook and Instagram) and the two largest messaging assets in the world (Messenger & WhatsApp);
- Our checks and management commentary suggest no material change in Marketer views of the attractiveness of Facebook platforms;
- Monetization of core Facebook and Instagram assets still has material upside potential and Messenger and WhatsApp are beginning early stages of monetization;
- Facebook’s aggressive investments are improving platform security and creating future revenue streams;
- Even under pressure, Facebook’s producing impressive growth.”
Richard Dickie Hodges, Manager of Nomura Global Dynamic Bond fund, blames US interest rate rise fears for October’s market slump.
Getting firmly into the Halloween spirit, he writes:
‘The Federal Reserve remains the biggest, scariest vampire in the markets today. As it sucks the life-blood of investment markets with interest rate rises, the so-called “risk-free rate” becomes more attractive, the cost of funding risk rises and all risky assets must adjust to offer higher returns. In other words, they must sell off.
‘But our Nosferatu is a complex villain – it cares deeply for its victim. As rates climb, it forces volatility into the stock markets, especially emerging markets with US dollar funding requirements that fear the higher greenback. It is this volatility that may cause the Fed to slow or pause the blood-letting in 2019.’
FAANGS up
Halloween is a time for fangs, so it’s appropriate that the FAANG stocks are rallying in New York.
With Facebook now up 6.8%, Netflix also up 6.8%, Amazon up 4% and Alphabet up over 3.1%, technology stocks are in demand.
But this treat comes after a very tricky October, which saw tech stocks slump by around 10% during the month.
Microsoft is leading the Dow’s rally, up 3%, followed by credit card firm VISA (+2.7%), industrial equipment firm Caterpillar (+2.4%) and Apple (+2.1%).
Wall Street opens higher in Halloween rally
There’s a Happy Halloween spirit on the New York stock exchange, as the final trading day of a brutal October kicks off.
The Dow Jones industrial average has leapt by 251 points, or 1%, to 25,125. That’s on top of Tuesday’s 400-point leap, and might cheer spirits on Wall Street.
But it won’t fix October’s bad losses on its own.
Stocks open higher, but Dow still on pace for 5% loss in October https://t.co/7qxovqoBsq pic.twitter.com/9cuxIZQbTb
— CNBC Now (@CNBCnow) October 31, 2018
The Nasdaq index has surged by 1.6%, as technology stocks rally.
Facebook shares have jumped by 5%, as investors show they like last night’s results from the social network giant.
General Motors have surged by 6%, after beating profit and revenue estimates today.
European markets are still sharply higher, as traders prepare for Wall Street to open....
Global stocks facing biggest losses since 2012
Global stock markets is up 0.6% already today, thanks to gains in Asia and Europe.
The MSCI All Country World Index has risen to 481.03 points, up from 478 last night.
But October has still been a pretty horrific month for stocks. The ACWI ended September at 524 points, meaning it has lost over 8% this month.
In points terms, this looks like the biggest destruction of value since the financial crisis of 2008.
In percentage terms, it looks like the worst month since May 2012 (when the ACWI fell from 328 points to 297, down 9.4%).
Updated
The US president reckons shares are going up again today...
Stock Market up more than 400 points yesterday. Today looks to be another good one. Companies earnings are great!
— Donald J. Trump (@realDonaldTrump) October 31, 2018
Boom! The FTSE 100 just nudged a new three-week high after a strong morning’s trading.
Britain’s blue-chip index is now up 113 points, or almost 1.67%, at 7153 points, as traders try to shake off their October blues.
Mining groups such as Antofagasta and Glencore are among the top risers, along with equipment rental firm Ashtead and banking group Standard Chartered (after its strong results this morning).
Retailers are struggling, though, after Next reported slower growth this morning.
Remember: The FTSE 100 started the month over 7,500 points, so it’s still down 5% this month alone.
Connor Campbell of SpreadEx says traders are hoping for peace in the global trade wars:
The unspooked celebrations continued on Wednesday, the markets wringing all they can from Donald Trump commenting on Tuesday that a ‘great deal’ with China is on its way, undoing some of the renewed trade war fears that had hit on Monday night.
With basically every major sector in the green – spare a thought for Next, languishing at the bottom of the index following its latest high street woes – the FTSE could jump more than 100 points as the day progressed.
That lifted it above 7150 for the first time in 3 weeks, the index scraping off the top layer of October’s losses while coming nowhere close to mounting a full on recovery.
Another reason for optimism: Canada’s economy expanded by 0.1% in August, a better performance than expected.
*CANADIAN ECONOMY EXPANDS 0.1% IN AUGUST VS. FORECAST UNCHANGED
— Michael Hewson 🇬🇧 (@mhewson_CMC) October 31, 2018
*CANADIAN GROSS DOMESTIC PRODUCT GROWS 2.5% FROM YEAR AGO
— Michael Hewson 🇬🇧 (@mhewson_CMC) October 31, 2018
Newsflash: American companies took on staff at a healthy pace this month.
US firms created 227,000 new jobs this month, beating expectations of 189,000 fresh hires.
Services companies led the way, expanding their payrolls by 189,000 to the total while construction and manufacturing firms both hired 17,000 new workers.
That suggests the US economy remains robust, and could mean this Friday’s Non-Farm Payroll (employment report) is strong too.
Private payrolls gain 227K in Oct, vs 189K estimate - ADP/Moody's https://t.co/0zxBkcqnus
— CNBC Now (@CNBCnow) October 31, 2018
It’s a little early for 2019 market predictions, but we’ll make an exception for this one:
2019 market outlook. pic.twitter.com/DUbTT0cCyL
— Karl Schamotta (@vsualst) October 31, 2018
It’s a Happy Halloween for carmaker General Motors, which has just smashed Wall Street expectations.
GM has also raised expectations for the months ahead, which should cheer US investors.
Reuters has the details:
General Motors on Wednesday posted far stronger-than-expected quarterly profit and said its full-year earnings forecast would come in at the high end of its forecast due to strong demand in North America.
The Detroit automaker reported third-quarter net income of $2.53 billion, or $1.75 a share, compared with a loss last year of $2.98 billion, or $2.03 a share.
Last year’s quarter included a charge related to Europe.
Excluding one-time items, GM earned $1.87 a share in the third quarter, easily beating the $1.25 analysts polled by Refinitiv estimates had expected. Revenue in the quarter rose 6.4 percent to $35.8 billion, above the $34.85 billion analysts had expected.
A quick catch-up on the markets:
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Britain’s FTSE 100: Up 105 points or 1.5% at 7141, a 3-week high
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Europe’s Stoxx 600: Up 5 points or 1.6% at 361, a nine-day high
- Japan’s Nikkei: Closed 463 points higher at 21,920, up 2.16%
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China’s Shanghai Composite index: Closed 35 points higher at 2,602, up 1.35%
Eurozone inflation rises, but jobless rate unchanged
The latest inflation data has given eurozone policymakers a Halloween headache.
Consumer prices across the single-currency bloc rose by 2.2% this month, the fastest rate since 2014, up from 2.1% in September
Core inflation, which measures underlying price pressures, jumped to 1.1% from 0.9% a month ago.
That suggests the European Central Bank is right to rein in its stimulus plans, and halt bond-buying at the end of 2018. However, we learned yesterday that the eurozone economy slowed sharply over the summer -- which might mean more stimulus is needed.
Separately, unemployment rate across the eurozone was unchanged last month at 8.1%. That’s the joint-lowest rate in a decade, but also much higher than America (3.7%) and the UK (4%).
September 2018: euro area #unemployment at 8.1%, EU28 at 6.7% https://t.co/k7ai4RJDrn pic.twitter.com/QoKd9mFERy
— EU_Eurostat (@EU_Eurostat) October 31, 2018
UK butchers chain collapses, putting 600 jobs at risk
It’s a grim day for UK butchers chain Crawshaw Group.
The supplier of sausages, chops, joints and pies is falling into administration. This puts 600 jobs at risk across 54 stores, which could close unless a buyer can be found.
My colleague Julia Kollewe explains:
The Yorkshire-based company, which was founded in 1954, has been talking to investors over the past month but has failed to raise the funds it needed.
It expects to appoint administrators later on Wednesday who will then try to find buyers for the business and its assets. Crawshaw has 42 high street stores and 12 factory outlet stores across the Midlands and the north of England.
M&G: Some Halloween charts to chill the blood
Full marks to the Bond Vigilante’s team at M&G, who have produced some spooktacular charts today.
The first shows the remorseless march of US student debt, which has tripled over the last decade.
Laura Frost, fixed interest investment specialist at M&G, says this debt burden can undermine the wider economy.
“US Federal Reserve (Fed) Chairman Jerome Powell recently warned about the ever-increasing amount of US student debt outstanding: “You do stand to see longer-term negative effects on people who can’t pay off their student loans. It hurts their credit rating, it impacts the entire half of their economic life.” Student debt also impacts the overall economy: as graduates seek to repay their loans, they are forced to make concessions to their financial consumption, leading to an ever-growing drag on the economy. They buy fewer goods and services and are delayed in joining the housing ladder, with many choosing (or having) to rent instead. On top of this, student debt sees the highest 90+ day delinquency rate of all US consumer credit.”
Readers of a nervous disposition should take a deep breath, before looking at the next chart -- the interest rate on longterm US bonds. After falling steadily for decades, it’s started going up!
Frost explains why it matters:
“The long-end of the US Treasury market has often been described as a giant anaconda: it draws little attention as it sleeps most of the time, but the minute it wakes up, everybody around shakes. US 30-year bonds don’t bite, but their moves can be as poisonous as they basically determine millions of mortgage rates, as well as the price that governments and companies around the world pay for debt.
The 30-year Treasury yield has remained within the support and resistance level shown for over 30 years, rallying 6% over the period and giving investors a long bull run. Does the recent breach through this level mean that the anaconda is beginning to stir?”
Finally, a picture that might scare Donald Trump - it shows how US central bankers have struggled to maintain full employment, without triggering a recession.
Frost explains:
“With US unemployment at rock-bottom levels and the stock market at near record highs, the Fed has begun hiking rates in an attempt to engineer a soft landing: it wants to slow the economy enough to avoid an overheating, but not so much that it causes a recession.
How many times over the past 70 years has the Fed successfully managed to do this and return unemployment (green line) back up to its natural level (blue line) without a recession ensuing (vertical bars)? You’ll be scared after counting…”
Many markets in the red for 2018
The slump in Red October has dragged many global stock markets into negative territory for this year.
Here’s a selection of the best and worst performers in 2018:
- Bovespa Stock Index (Brazil) +9.7%
- NASDAQ 100 +6.5% (US)
- Dow Jones Industrial Average (US) +0.6%
- S&P 500 +0.3% (US)
- Nikkei 225 (Japan) -3.7%
- CAC 40 (Paris) -4.5%
- FTSE 100 (UK) -7.3%
- DAX Xetra (Germany) -11.4%
- Hang Seng (Hong Kong) -16.5%
- SSE Composite (China) -22.3%
But there’s still time for a turnaround.
Russ Mould, investment director at AJ Bell, says:
The markets are racing ahead following a very good session last night in the US where the S&P, Nasdaq and Dow Jones all posted gains in excess of 1.5%.
“It’s now the turn of European and Asian stocks to join the rally with the FTSE 100 shooting up 1.5% in early trading on Wednesday and Japan’s Nikkei 225 index jumping 2.2%.
“The latest rally means the S&P, NASDAQ and Dow Jones are all back in positive territory for the year. The only other major index to share this status is Brazil’s Bovespa index, up 9.7% so far this year.
“The upturn in the market is positive for investors, although the main UK indices still have some way to go before they get back into the black. The FTSE 100 is currently down 7.3% year-to-date, and the FTSE 250 down 8.7%.
Michael Hewson, chief market analyst at CMC Markets, says markets may be turning the corner, after a rough October:
Asia markets managed to close out the month of October and post their second consecutive day of gains in what has been a pretty poor month for equity markets in general.
This rebound could well be down to some end of month position adjusting, however there have been some indications in the past few days that we might be starting to see a bit of a short term base, with most of the bad news already priced in to some extent.
American’s can’t get enough of Halloween, so Wall Street is eager to join today’s rally.
Here’s the pre-market calls from CMC Markets:
- Dow Jones is expected to open 136 points higher at 25,010
- S&P500 is expected to open 18 points higher at 2,700
Updated
FTSE 100 keeps climbing
The FTSE 100 is continuing to push higher. It’s now up 115 points, or 1.6% to 7150.
Nearly every sector is up, led by manufacturers, energy firms, tech stocks and banks:
Here are the top risers on the Footsie this morning
However, this still leaves the FTSE 100 nursing a 5% loss for October (it started the month at 7,510).
Updated
Despite today’s Halloween rally, global markets are still on track for their worst month since the financial crisis.
Figures calculated earlier this week showed that $8 trillion had been wiped off global stocks in October.
Trade wars, the slowdown in China, tensions in the eurozone and Brexit have all encouraged investors to ditch risky stocks.
Naeem Aslam of Think Markets says:
Smart money is running for the hill and this was the message which October brought for the global equity market. Global stocks lost over $8 trillion in October, a headline which suits the best on the Halloween day.
Updated
Investors are refusing to be spooked on Halloween, says Connor Campbell of SpreadEX:
With October containing as much red as the goriest of slasher flicks, the markets oddly chose to rebound on what would have been an entirely calendar-appropriate day to continue the month’s trading horrors.
Building on Tuesday’s gains, the FTSE shot up 1.3% after the bell, allowing the index to cross 7100 for the first time in 3 weeks. It benefited from the market-wide shift in sentiment, which itself came despite further evidence that the trade war is hurting the Chinese economy, as the country suffered a slide in manufacturing activity.
Overnight, China got the shivers, as manufacturing activity fell and the yuan was fixed at a new 10-year low to the dollar.
Today’s rally is welcome, but it’s not enough to wipe out this month’s losses.
October has been particularly bad for US investors, with the main indices falling sharply.
CNBC has crunched the numbers, and explains:
After Tuesday’s comeback, the Dow is down 5.9 percent this month, still its worst performance since August 2015. The S&P 500 is off by 7.9 percent in October, on track for its worst month since May 2010. On Monday, the S&P 500 closed in correction territory, down 10.2 percent from its record.
“Obviously we’re in a correction phase of the stock market and I think investors have to realize that,” said Bruce Bittles, chief investment strategist at Baird.
“The monetary environment has changed. As you can see, even with a 10 percent change in the stock markets, interest rates have barely moved lower.”
European stocks are all jumping - fortunately not with fright.
Updated
Weeeee! The FTSE 100 is flying faster than a rocket.
The blue-chip index has gained 88 points, or 1.2%, to 7124, clawing back some of this month’s losses.
Bank Standard Chartered is leading the charge, up 4% after reporting that profits rose from $557m to $752m in the last quarter.
Retailer Next is struggling, though, down almost 5%.
Next reported that full priced shares are up 2% year-on-year, but retail sales (at its high street stores) have plunged by 8.0% in the last quarter. Online sales growth has slowed, to just +12.7% compared to +14.8% in the year to date.
Updated
Introduction: A month of spooky losses
Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and business.
It’s Halloween - a dark time of ritual, dressing-up, and trick-or-treating. But any children touring the City of London must make a special effort to scare investors; they’re well used to shocks and scares this month.
October has been a torrid month for equities. Britain’s FTSE 100 has shed 6% over the last 30 days, even hitting a 22-month low last week, as global markets took a collective chilly bath.
If you really want to make a investor quiver, wave a chart showing how world markets have lose almost 8.5% this month, wiping out trillions of dollars of value.
Craig Erlam of trading firm OANDA says there is fear on the trading floors:
October has well and truly lived up to its chilling reputation, with stock markets around the globe suffering one of their worst months in recent memory. It’s been a wild ride for investors and there is no guarantee it’s over yet.
Markets may have recovered their early losses and some indices may even be in the green for the week but volatility has not eased and that’s a concern.
But after a month of gory red, things might be turning.
Wall Street rallied last night, with the Dow gaining more than 400 points. Stocks have strengthened in Asia too, with Japan’s Nikkei gaining 2% and China up nearly 1.5%.
Thea main European markets are also up in early trading.
European Opening Calls:#FTSE 7099 +0.89%#DAX 11402 +1.02%#CAC 5031 +1.06%#MIB 19218 +1.15%#IBEX 8900 +1.07%
— IGSquawk (@IGSquawk) October 31, 2018
#FTSE100 called +65pts at 7100 after a bullish breakout from a 3-week falling channel, extending the current rebound rally pic.twitter.com/36YwTdeaV8
— Mike van Dulken (@Accendo_Mike) October 31, 2018
There are still reasons to hide under the bedsheets, though. Yesterday, we learned that eurozone growth has halved.
Later today we get fresh unemployment and inflation figures for the eurozone. David Madden of CMC Markets says this data could set the mood for the day, and beyond:
The stand-off between the Italian government and the EU continues. Italy’s economy grew 0.8% in the third-quarter on an annual basis, which was below the forecast of 0.9%.
Matteo Salvini, Italy’s joint deputy prime minister claimed the underwhelming update is a reason the government needs to increase spending, and in turn increase the budget deficit. The Italian situation could spark another round of the eurozone debt crisis, and given that the country has the third-largest government bond market in the world, the fallout could be enormous.
Dealers will be keeping an eye out for the eurozone CPI and unemployment reports which are due out at 10am (UK time). The CPI rate is tipped to be 2.2%, and the jobless rate is expected to hold steady at 8.1%.
The agenda
- 10am GMT: Eurozone unemployment stats for September
- 10am GMT: Eurozone inflation (flash estimate) for October
Updated
