Weak earnings a drag on FTSE

UK corporate earnings are not painting a pretty picture this morning, coming at a time when the spread of the coronavirus is already eroding the outlook for some companies. The FTSE is trading down almost 0.6% but home builders and utilities are providing some counterbalance.

BT is the most heavily sold stock after the telecoms firm reported a drop in third quarter revenue and warned that limiting the role of Huawei in Britain’s 5G expansion will increase the cost of its own gigabit plans by £500m .

Shell blamed a drop in the oil price in the last quarter on a 23% decline in its earnings and a far deeper plunge in net profits. Investors sold off the share in sync with rival BP in anticipation of a similar set of results from BP next Tuesday.

In a more normal situation in the markets BP would have been granted a little bit of respite given that oil prices have risen since the current reporting period, during the inflamed Iran-US tensions in early January. However, now that the coronavirus seems to have got its hooks into parts of China, the outlook for oil prices is beginning to deteriorate. Brent crude has dropped below the $58 mark and is unlikely to show any signs of recovery until China is free of the virus and back to being fully operational.

Pound slides ahead of BoE decision

The Bank of England is back in session today and for once the outcome is less than a given. In the lead up to this rate setting meeting four of the nine members indicated that it may be time to cut rates to help revive the UK’s slowing economy, but since then the UK’s economic indicators have started improving slightly, particularly in the housing market. The “what happens after Brexit” remains the big unknown and although investors seem to have less immediate concerns it is still not clear how Brexit will play out for businesses over time. The pound is a touch lower against the dollar and losing more ground versus the euro.

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.