European Markets Withstand US Tech Flu


In the last day of trading before the US closes down for Thanksgiving holidays, risk aversion has eased and stocks are trading higher.

Despite a sharp selloff on Wall Street late Tuesday which continued amid Asian technology stocks this morning European markets are trading solidly higher. However, concerns over the US-China trade relations continue to linger and oil prices, though higher after the London market opened, remain relatively low.

Company results met with mixed market reactions

In London, a host of company results, mostly positive, was met with mixed reactions this morning. United Utilities, for instance, traditionally a staple stable stock, is being sold off despite reporting a 7% pretax profit and increasing its dividend. Sage Group and Kingfisher were also hit, the former for forecasting lower operating margins and the latter because its sales in the UK are declining. Precious metals firm Johnson Matthey was one of a few stocks to be bid up post results, having reported a nearly 20% increase in pretax profit and forecasting strong full year growth. The unforgiving mood in the market is a reflection of the underlying Brexit tensions which continue unabated as Theresa May heads for Brussels to finalise the current Brexit deal. EU officials have yet to ratify the text before them with access to the EU single market and Gibraltar remaining the stumbling blocks. At home, the stream of comments from various MPs continues to indicate that there is a good chance of the deal being rejected once it comes back for final parliamentarian approval.

No wonder then that the pound is heading in two directions, weakening against the euro but holding its ground against the dollar. In contrast, the greenback is under pressure this morning, weakening against a basket of currencies as the safe haven buying triggered by this week’s Wall Street tech stock sell-off eased.

Oil up but from a low base

Brent crude and the WTI are trading 1.1% and 1.83% higher this morning, not so much because the fundamentals have started working in favour of black gold but because at current prices they are starting to look relatively cheap – given that they have lost more than 25% over the last three weeks. The market may need to consolidate around the current levels and work out the next signal because supply and demand data now can be interpreted either way.