Europe

European markets have had a largely more positive day than they did yesterday, although the FTSE100 has lagged a little, with the travel and leisure sector once again acting as a drag on the wider market, although we’ve also seen weakness in financials.

IAG and easyJet are once again on the back foot with the shares getting another nudge lower after US carrier Delta Airlines warned that higher fuel costs would likely send it back into loss in Q4. This weakness comes despite oil prices largely sinking back for the second day in a row, which in turn is weighing on the likes of BP and Royal Dutch Shell.

Financials are also losing ground, a trend that has been accelerated somewhat by a disappointing reaction to another decent set of numbers from JPMorgan Chase, though the decline in yields because of today’s US core CPI numbers, which remained steady at 4%, may also be playing a part. Barclays, Standard Chartered and Lloyds are leading the fallers here.

On the plus side, housebuilders are having a decent day after Barratt Developments issued a trading update for the period from 1st July.

The company said it remained on track to deliver on their 2022 targets, as set out in their recent full year results for 2021. Net private reservations per week are running at 281, compared to the same period a year ago. This rate is despite the withdrawal of the various stamp duty measures that were brought in to support the housing market post lockdown. Average selling prices have also risen to £344k, well up from £331.4k a year ago.

Barratt did admit there were issues with some construction materials but that they weren’t seriously disrupting progress on any of their builds. We’ve seen solid gains for the likes of Taylor Wimpey, Persimmon and Berkeley Group due to a positive read across.

Ocado shares have also continued to gain in the wake of yesterday’s positive Kroger update.

US

US markets opened a touch higher this afternoon after the latest US CPI numbers for September came in slightly above expectations at 5.4%, although core prices remained steady at 4%.

The early gains turned out to be pretty short-lived however with financials and airlines sliding lower, on the back of disappointment over the forward guidance for the wider outlook, although the Nasdaq is holding onto its gains.

We’d already seen a little bit of a sell-off in the JPMorgan Chase share price leading up to today’s Q3 numbers, as investors looked nervously to how the bank sees revenues and profits over the next quarter, or so. That weakness has continued today over concerns about the consumer business, as a well as a softening in bond yields due to the latest US CPI numbers, which showed some signs of a stabilisation, although the latest surge in energy prices won’t yet be reflected in those headline numbers.

At JPMorgan’s Q2 numbers, loan growth was cited as a concern, with CFO Jeremy Barnum saying at the time it was unlikely to improve this year. Today he did say that while trends were improving on credit card spending, and smaller business customers were seeing a bit of an uptick, it was clear from the overall tone that the outlook remained challenging, with commercial and consumer loans both lower.

Today’s headline numbers have nonetheless seen revenues beat expectations at $30.44bn, while profits surged to $3.74c a share.

On profits, the beat was large, largely due to another loan loss provision release, this time to the tune of $2.1bn. In most areas of the business, revenues beat expectations, although FICC fell slightly short.

Apple shares are slightly lower on reports that it could cut its iPhone 13 production targets for 2021 by up to 10m units.

Delta Airlines latest numbers saw profits improve again, with Q3 profits coming in at $0.30c a share or $1.2bn, a continuing trend of improvement from the Q1 loss of $1.2bn and the Q2 profit of $652m. More importantly, once Federal aid was stripped out profits came in at $194m, however the hasn’t been enough to prevent the shares dropping sharply.

This is largely down to Delta warning that Q4 may see a return to losses due to higher fuel costs, which it said could go as high as $2.40c in the upcoming quarter. If this is an indicator of things to come, then the light at the end of tunnel, which had been brought about by the announcement of the relaxation of travel restrictions, now looks like it could be crushed by the train of higher fuel costs coming the other way. The rest of the sector has also lost ground with falls for American Airlines and United.

FX

The US dollar slid lower after the latest US CPI numbers for September showed signs of a stabilisation in the upward track of prices with core CPI remaining steady at 4%.

The pound has shrugged off some disappointing monthly GDP numbers for August which showed the economy expanded by 0.4%, with index of services only contributing 0.3% against an expectation of 0.6%. A lot of attention has rightly been focussed on the fact that the latest numbers have been weaker than expected, however previous months have seen considerable upgrades, which has meant on a rolling back the numbers earlier this year were much better than originally reported.

Commodities

The slide in yields has seen gold prices move sharply higher, on course for its biggest one-day gain since March, while we’ve seen similarly strong gains in other precious metals prices, with palladium up 5%.

Brent crude prices appear to be on course for their second successive daily decline after hitting a three year high on Monday. With airlines warning that the rise in energy costs may well hinder their recovery, prices are starting to slip over concerns about demand destruction.

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