Derren Nathan, head of equity research, Hargreaves Lansdown:“The FTSE 100 has continued its shallow downward path this morning, after retreating from yet another record high yesterday, driven by weakness in the UK banks. The sector dip related to specific regulatory and strategic themes rather than the broader health of the sector, namely HSBC’s proposed $14 billion investment in Hang Seng bank - and uncertainty over the size of car finance compensation pay-outs for Lloyds.
Brick maker Ibstock has issued a downgrade in its third quarter trading statement. Underlying cash profit (EBITDA) is now expected to land at around £72 million compared to previous guidance of about £80 million. Demand in the Clay and Concrete division has been weaker than expected, reflecting the near-term 'economic and political' environment. Uncertainty around property taxes in the later-than-usual Autumn Budget, due 26 November, could mean construction starts hit a brick wall, so keep one eye on the ripple effect for housebuilders later today.
US futures are faintly up, after Wall Street lost a little steam on Thursday, with the major indices also retreating from their all-time bests. The small matter of the US government shutdown hasn’t gone away, with the Senate still stuck in deadlock after its seventh round of votes on funding proposals.
Meanwhile, the great reality check otherwise known as third quarter earnings season is upon us. The overall outlook for reporters looks robust. Average earnings per share growth of 8% is expected for US large caps, up from the 7.3% forecasted at the end of June. That’s been fuelled by a record number of guidance upgrades. But one quarter’s numbers alone aren’t enough to justify the current market optimism. Rational investors need to keep at least one eye firmly on the future, so comments around the immediate and longer-term outlooks will be more important than ever. That’s particularly true for the tech giants that are fuelling the AI rally. While there's plenty of reason for optimism in the sector, the usual reasons to stay diversified haven’t gone away.
Oil prices have softened, reflecting an easing of the risk premium, after Israel signed off on a ceasefire agreement with terror group Hamas, brokered by Donald Trump. It’s a step in the right direction, with the release of Israeli hostages and an end to military action in Gaza set to bring relief to both beleaguered populations. But there’s still a long way to go if there’s to be a lasting peace in this multi-decade conflict. Brent crude oil prices at close to $65 per barrel remain on track for a weekly gain, with oversupply fears still dominating, despite the restraint shown by OPEC+ earlier in the week.”
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