European markets were mixed on corporate earnings reports

United States
The S&P 500 closed at a record high on Thursday as investors regained confidence in the market following the deal to avoid a US default. However, weak earnings reports from IBM and Goldman Sachs pulled the Dow Jones industrials slightly lower. The Dow edged down 2.18 points while the S&P and Nasdaq rallied 0.7% and 0.6% respectively.

EBay dropped after the company gave a disappointing holiday forecast on Wednesday, saying the US economic environment had deteriorated partly because of the government shutdown. Verizon Communications advanced after the company posted stronger than expected third quarter earnings and revenue. IBM slumped after reporting third quarter revenue below expectations amid a sharp decline in hardware sales. Net profit, however, topped estimates. Goldman Sachs retreated after it said its quarterly profit dropped amid weak bond-trading volumes.

Google said that its consolidated revenue increased 12% to US$14.89 billion in the third quarter, even as losses deepened at its Motorola mobile phone business. Its Internet business delivered net revenue, which excludes fees paid to partners, of US$10.8 billion in the third quarter, up 23% from US$8.76 billion in the year-ago period. Google said it earned US$2.97 billion, or US$8.75 per share in the three months ended September 30, compared to US$2.18 billion, or US$6.53 per share, last year.

The number of Americans filing new claims for unemployment benefits dropped from a six-month high last week but remained elevated as California continued to deal with a backlog related to computer problems. The Philadelphia Federal Reserve's October index of manufacturing activity slipped to 19.8 from September's 22.3.

Gold at the afternoon London fixing jumped US$45.75 to US$1,319.25. Copper futures were down 0.5% to US$3.29. WTI spot crude was down US$1.69 to US$100.60. Dated Brent spot crude was down US$1.65 to US$108.94. The US dollar was down against all of its major counterparts including the yen, euro, pound, Swiss franc and the Canadian and Australian dollars. The Dollar Index dropped 1.1%. The yield on US Treasury 30 year bond was down 7 basis points to 3.66% while the yield on the 10 year note dropped 8 basis points to 2.59%.

Europe
Stock markets were mixed Thursday as they steadied after the recent sharp rally and as investors shifted their focus to corporate news following a deal in Washington to avert a US debt default. The markets rallied in late trading Wednesday on investor optimism that a deal would be reached. Profit taking set in Thursday though after European markets traded near 5 year highs. Investor sentiment was also affected by some mixed earnings reports from both Europe and the US. The FTSE edged up 0.1% and the SMI was 0.6% higher. The CAC and DAX were down 0.1% and 0.4% respectively.

Metro climbed after the company backed its adjusted EBIT outlook for the short financial year from January through September despite reporting lower sales of €15.5 billion in the third quarter. Carrefour increased after the retailer reported higher sales for the third quarter, helped by strong performance by its French hypermarkets. British Sky Broadcasting climbed after its first quarter revenues increased. SABMiller gained after it reported results for the first half of the year. Polymetal International surged after it announced a 30% increase in gold production for the quarter. However, Sulzer tumbled after the machinery manufacturer announced job cuts after lowering its financial target for the full year. Nestle advanced after it said it expects to deliver nearly 5% organic growth for the full year, along with a rise in margins and underlying earnings per share in constant currencies amid an improvement in its capital efficiency. Royal KPN dropped after America Movil SAB de CV announced that it will not make a takeover offer for the company.

UK retail sales increased a more than expected 0.6% in September as rising employment boosted consumer morale.

Asia Pacific
Stocks here were mixed in the aftermath of a short term agreement that reopened the US government and raised the debt ceiling. The Nikkei was up 0.8%, extending gains for the seventh straight session on relief over the last minute deal. Exporters benefited from a weaker yen, which traded at a three week low against the US dollar and the euro early in the session. Advantest, Honda Motor, Nikon and Fanuc advanced as did Fast Retailing, KDDI, Mitsubishi UFJ Financial Group and Nomura Holdings. Kansai Electric Power jumped after the utility swung to a first half consolidated net profit of ¥15 billion, beating its forecast of a¥ 32 billion loss. Sharp retreated on a brokerage downgrade and Tokyo Electron declined.

The Shanghai Composite slipped 0.2%, extending losses for a third consecutive session, as investors exhibited caution ahead of reports on GDP, factory output and retail sales that are expected Friday. The Hang Seng index dropped 0.6%. The S&P/ASX gained 0.4% and the All Ordinaries was 0.3% higher. Banks advanced while miners retreated. The Kospi gained 0.3% as overseas investors extended their record-breaking buying spree for the 35th straight session.

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.

Looking forward* China releases September industrial production and retail sales along with third quarter gross domestic product. Canada posts September consumer prices.

Link: https://www.fidelity.co.uk/investor/news-views/daily-market-review/details.page?whereParameter=global_market_update/18-10-13