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European equities are lacking clear direction this week whilst all eyes are on the fortunes of the new Brexit deal being considered in Westminster. Last week, global stocks progressed on decent corporate earnings and geopolitical optimism, leaving the S&P 500 near all-time highs. The FTSE 100, however, fell 1.13% as sterling rallied 2.26% against the dollar.
Boris Johnson hopes to win a first vote on his Withdrawal Agreement bill today that would progress it to a second reading, but faces some resistance in his attempt to hurry the legislation through in time to leave the EU on October 31st. The bill, published last night, reveals that European law would apply to the UK until at least December next year, but Johnson is hopeful of repelling attempts by MPs to bind the government to a second referendum or a customs union. The next vote would be on the prime minister's condensed timetable.
Deloitte's quarterly consumer confidence survey showed that sentiment amongst UK consumers is weakening. However, although Brexit-related concerns about job security and job opportunities weighed heavily on overall confidence, an increase in young peoples' optimism towards their disposable income led to an increase in spending on recreational activities.
US retail sales and industrial production data disappointed last week, the latter being driven by a 0.5% drop in manufacturing output in September. Meanwhile, it was revealed that Eurozone industrial production fell 2.8% in August, marking the tenth consecutive month of contraction.
Economic news from China was no more uplifting. GDP growth decelerated to 6.0% (year-on-year) in the third quarter, which is the slowest pace in two decades. A slowdown in investment was key to the deterioration, which policymakers seem to be allowing while they try to improve the integrity of their financial system.
The latest soundbites from American and Chinese negotiators have been positive, with some suggesting December tariffs could even be withdrawn. Finally, crude oil prices have fallen over the past week as US inventories surged and OPEC lowered its oil demand growth forecasts for 2019.
Reckitt Benckiser cut its forecast for revenue growth this year after a “disappointing” and “slow” third quarter. New chief executive Laxman Narasimhan said that revenues rose 1.6% last quarter but volumes dropped 1%. It's the second time Reckitt has lowered its estimations this year and it cited challenging retail conditions in the US and China.
Whitbread also announced disappointing data this morning, posting a 0.1% fall in underlying revenues to £1.08bn in the first half of 2019. The owner of Premier Inn is suffering from a slowdown in demand from businesses as the economy slows and has also suffered from rising costs, dragging underlying profits down 5.6%.
UBS reported a sharp 16% drop in third-quarter profits this morning as its investment bank suffered a 59% drop in profits to £203m. Profits in its wealth management arm were more resilient but still fell 2% and the personal and corporate banking business fell 10%. UBS cited the challenging global economic backdrop and added it would be restructuring the investment bank.
Smith & Nephew saw more than £1bn of its market value wiped off yesterday following the sudden departure of its chief executive, Namal Nawana, who was only 18 months into his tenure. The company faces a potential backlash as Nawana's exit is due to a dispute about his compensation being less than that of his American peers. Shares had risen about 40% during his time in charge.
M&G and Prudential shares both made a steady start to trading yesterday following the split of the businesses. M&G, the asset management business, is valued at about £5.6bn and rose 1.4% yesterday, while Prudential rose 6.2%. Prudential is likely to be considered a better growth option, while M&G is expected to be a high dividend-payer.
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