Financial market research and analysis

British policymakers have finally agreed on a Brexit deal, as Boris Johnson’s plan saw the first ever majority in the House of Commons. But policymakers refused to hurry up to turn the withdrawal agreement into law before the October 31st deadline. As a result, the Brexit will likely be delayed, again. But this time, investors can see the light at the end of the tunnel. EU’s Donald Tusk recommended that the UK is given the time it needs to sort its internal issues out to finalize the divorce. The only question is how Boris Johnson will spend the next three months. There are rising talks of an early general election in the UK.

The pound fell as investors, who had bought the rumour that BoJo’s Brexit deal would pass through Parliament, sold the fact. Moving forward, the snap election talks could dampen the investor sentiment and a correction could pull the pound below 1.2820 against the US dollar, the minor 23.6% Fibonacci retracement on September – October rebound. But key support is seen at 1.2700, the major 38.2% retracement, with the waning likelihood of a no-deal Brexit.

The British blue-chip index closed Tuesday’s session in the positive territory as energy stocks gained nearly 2% on the back of an OPEC-related positive push in oil prices.

The FTSE 100 is expected to slip below the 7200p mark at the open. But expectations of an orderly Brexit could encourage some investors to purchase promising FTSE stocks before the pound appreciates further.

The DAX is seen 80 points lower at 12675.


Higher US oil inventories could reverse gains in oil and energy stocks

WTI crude rallied past the $54.50 a barrel on Tuesday, as Brent crude traded shortly above the $60 handle on news that OPEC and its allies would consider deeper production cuts at their December meeting.

The US inventory data capped the rally however, as the API data showed 4.45-million-barrel rise in the US stockpiles last week. The more official EIA report should confirm a sixth consecutive week rise in US oil inventories, with significantly higher prints compared to analyst expectations each week.

Energy stocks recorded timid gains in Sydney (+0.24%), as Asian equity indices edged lower.

Hong Kong stocks led losses despite the announcement of a $2 billion relief package to support its bruised businesses, with focus on tourism, transportation and retail industries.


USD gains.

The US dollar gained against the G10 majors in Asia, except the yen. But the DXY index stands circa 2% lower than where it was at the beginning of October on heightened rate cut expectations at next week’s FOMC meeting.

Gold climbed to $1490 an ounce on limited risk appetite.

The EURUSD bounced lower from 1.1180 on Tuesday. The pair should continue moving on dollar-related news, as Thursday’s European Central Bank (ECB) decision should not be a big deal for the market. Price pullbacks could encourage dip-buyers to join the bull market approaching the 1.1100 support. Further weakness in the greenback should pave the way toward the 200-day moving average (1.1206).


ebay, Microsoft and Tesla earnings in focus

In the US equity markets, the sell-off in tech stocks outweighed gains across the energy sector on Tuesday. US stock indices closed in the red, and the S&P (-0.32%), Dow (-0.27%) and Nasdaq (-0.38%) futures followed up on New York losses.

The investor focus remains on company earnings.

Released after the market close, Snap’s revenues and user growth beat analyst estimates but the gloomy fourth quarter revenue guidance fell short of analyst expectations. A post-result sell-off could reverse the latest positive momentum and send the share price to the medium-term bearish consolidation zone, if the major Fibonacci support at $13.20 is cleared.

Today, e-bay, Microsoft and Tesla will reveal their third quarter results after the market close.

Microsoft will likely restate the strong demand for its cloud portfolio amid SAP’s announcement of a three-year cloud competing deal aiming to facilitate its customers’ move to the Microsoft’s cloud. Meanwhile, a one-off tax payment should temper the rise in EPS. Microsoft’s EPS estimate stands at $1.244.

Tesla, on the other hand, will likely continue giving its investors a headache with further decline in its revenues through the third quarter of 2019. Tesla’s pre-tax loss may have approached $1 billion during the first nine months of the year. The company is expected to post positive earnings next quarter, albeit the retaliatory tariffs may hit its business in Europe and China and hinder sales. Tesla’s EPS is expected to have fallen to $-0.239 per share from $-0.787 printed a quarter earlier.