The main story this morning is the overnight election results from the US where the midterm vote looks to have given the Democrats control over the House of Representatives, while the Republican party has extended its control over the Senate.
Vote threatens the send of Trump bull run
Winning both houses was always going to be a long shot for the Dems, but the result will have important consequences for both Trump and the markets. For starters, the President will now find it much more difficult to get legislation through Congress and will have to fend off more legal challenges, including new impetus to the investigation into his campaign’s collusion with Russian actors in 2016.
But the 28% gain in US stocks since Trump was voted in can be heavily ascribed to his tax cuts and stimulus measures. The S&P 500 was already coming off the boil, down 7% in October, ahead of this vote. While there is probably enough momentum in US equities to create further gains between now and year end, these results does look like the harbinger of the end of the Trump rally. This is before you factor in further rate rises from the Federal Reserve, which were already on the cards. US markets will have fully digested the news by the time they open at lunchtime with most analysts predicting negative action on Wall Street, although the USD was already being sold off this morning.
Strong FTSE open as miners power ahead
The FTSE 100 had a strong open this morning, despite poor numbers from M&S and ITV shares falling out of bed to the tune of more than 3%. Much of the positive action was in mining stocks, which were powering the index higher, with Antofagasta and Fresnillo leading the way, up 3.16% and 2.59% respectively. Metals prices have been responding to the weakening in the USD after the election results in the US, with gold, silver and most importantly copper all rising.
M&S confirms yet more bad news for UK high street
Marks & Spencer added to the woes of the UK retail sector, reporting a decline in like for like sales over the six months to the end of September. Bad news from UK retailers is no unexpected these days, and there were few silver linings from M&S, which admitted that it expected little improvement in its sales trajectory, and would be cutting prices. The main headwinds buffeting high street retailers this quarter continue to be the popularity of online offerings and the exploits of discount offerings like Aldi, Lidl and Primark. M&S shares were down 2.8% on the news, but given the levels of negativity around UK retail, it could have been worse.
Wizz Air presents strong balance sheet despite downgrade
The downgrade is disappointing but not entirely surprising given the current fuel-price environment. The good news is that disruption from industrial action appears to be easing and ticket prices are rising. Management is at least handling the things that it can control reasonably well. Revenue growth is keeping pace with capacity expansions, as load factors improve. Wizz Air still has a strong balance sheet, giving it firepower to invest in new fuel-efficient aircraft, which should ultimately cut costs over the long haul.