Financial market research and analysis

It’s funny how the Federal Reserve feel that any concerns they had over China in September have now dissipated as various members are of the view that negative spill overs have not materialised. Yet corporate earnings this morning and the cautious outlook would suggest that the Fed might want to take a second look. The FTSE is having difficulty rising above the 6300 marker this morning and is presently off by 0.68% with only 32 out of 63 stocks catching a bid.

Sainsbury (-2.92%) continues to fall in the wake of yesterday’s earnings announcements The fact that Lidl is planning to expand its store footprint in the UK is unlikely to be helping either.

Burberry (+0.97) First half profits increased despite the slowdown in China and warnings earlier this month that the outlook was challenging . A better than expected 3% rise in H1 underlying profit was helped by cost savings. Pre-tax profit was at £152.9m against consensus £144.2m. The outlook for H2 has not changed – the firm expects mid-single digit % growth in comparable sales.

3i (1.24%) Shares are up 9.4% this year and the firm has limited its exposure to Asia and South America and focussed more on Europe and North America. From BBG: ‘’ The macro and market environment has clearly deteriorated over the course of this year and the steps we have taken since 2012 to create a more resilient business are proving their value,” Chief Executive Officer Simon Borrows said in the statement. ‘’ The outlook for growth is uncertain in many parts of the world, including the Eurozone and China, and this is resulting in volatility across financial markets’’

The tumbling oil prices on Wednesday as weekly crude oil supply data showed a bigger than expected glut is plaguing some of the big oil companies again this morning.

BP (0.97%)
Royal Dutch Shell ( -2.64%)

Some consolidation in the oil sector is inevitable but has been a long time coming in the face of the decline in the oil price and the uncertainty of its direction from here. The world’s six largest publicly traded oil producers have more than a half-trillion dollars in stock and cash to snap up rival explorers. Exxon Mobil Corp. tops the list with a total of $320bn for potential acquisitions. Chevron is next with $65bn in cash and its own shares tucked away, followed by BP Plc with $53bn. It’s a question now of watching this space for any opportunities that may arise as a result of M&A.

Goldman Sachs released a note stating that the market is underestimating US inflation. It does not predict a rise in oil prices but expect US consumer prices to rise even if oil continues to consolidate at current levels. Sliding energy prices and slowing global economic growth have weighed down a measure of inflation expectations known as the 10-year break-even rate -- the gap between yields on Treasury notes and inflation-linked debt of that maturity.

Rolls Royce (-19.79%) The stock is off the lows, having initially dropped 22% in early trade on the back of yet another profit warning. Weaker demand puts its profits this year at the lower end of guidance. Next year’s guidance is the real issue where earnings are expected to suffer a £650m hit. Plans for restructuring are ahead and will be announced on November 24. Likelihood of dividend cut is also playing havoc with the share price this morning and it has removed over 9 points from the FTSE.

BAE SYSTEMS (+2.97%) - According to Reuters the company is in advanced talks to sell U.S. manpower and services businesses to Veritas Capital Management for >$1bn.