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London Quick Take - 5 Things to Know in Markets Today - 3 Nov
5 Things to Know in Markets Today
1. Mid-east and Mid-terms in focus
Stocks were generally depressed on Tuesday after the US struck Iran on the eve of the Midterm elections whilst tech shares have had fresh wobbles after yesterday's attempted rally on Wall Street stalled then reversed and investors digest Apple's earnings. Investors are focused on the result of the US Midterm elections, where the odds are shortening in favour of Democrats to take both houses. Gridlock is usually good for stocks, but a Blue Sweep could hurt banks, AI and crypto; it could hold up defence budgets; and could delay One Big Beautiful Bill Act tax cuts. It could also make Trump lean heavier on executive actions, and he could become more erratic on foreign policy as his last policy area which he controls fully. More on that here.
The US struck Iran's Qeshm Island in the Strait of Hormuz, in what's been described as a limited operation. Crude prices rose off the lows from yesterday on the strike but haven't moved aggressively on the apparent sign of escalation. Brent plunged yesterday on some overdone hopes the sides were favouring diplomacy, dipping around 8% to test the 50-day moving average support at $103.44, before rising around 2% this morning to clear $106.50, facing fresh resistance from the 23.6% retracement of the Jul-Oct rally around $106.70. Optimism on the Middle East seems uncanny, Trump's timeline is after the midterm elections, not before. As the strike shows there is always the prospect for escalation. The US is not involved in the talks between mediators and Tehran and there is considerable uncertainty over the US policy choice after the elections. Crude's fall yesterday pulled bond yields lower while the rout in tech stocks continued to underpin haven demand for bonds, taking the 10yr Treasury yield below 4.9% before ticking up a notch.
The US struck Iran's Qeshm Island in the Strait of Hormuz, in what's been described as a limited operation. Crude prices rose off the lows from yesterday on the strike but haven't moved aggressively on the apparent sign of escalation. Brent plunged yesterday on some overdone hopes the sides were favouring diplomacy, dipping around 8% to test the 50-day moving average support at $103.44, before rising around 2% this morning to clear $106.50, facing fresh resistance from the 23.6% retracement of the Jul-Oct rally around $106.70. Optimism on the Middle East seems uncanny, Trump's timeline is after the midterm elections, not before. As the strike shows there is always the prospect for escalation. The US is not involved in the talks between mediators and Tehran and there is considerable uncertainty over the US policy choice after the elections. Crude's fall yesterday pulled bond yields lower while the rout in tech stocks continued to underpin haven demand for bonds, taking the 10yr Treasury yield below 4.9% before ticking up a notch.
2.Stocks are under pressure
Pretty much anything tech-momentum-AI related remains under pressure with an abortive attempt at a rally yesterday on Wall Street, a signal that buyers are not rushing to buy the dip just yet. After opening about 0.7% higher the Nasdaq-100 ended the day down 1.4%, while the S&P 500 dipped 0.5%. Semiconductors (SOXX) gave up the 200-day moving average. The Dow Jones added +0.4% as there was some positive rotation into some of the more cyclical and denfensive areas of the economy with advances for the likes of Sherwin-Williams, Home Depot, McDonald's (reports today), Walmart- places that hold up pretty well whatever else is going on. US futures were tracking mixed with the NDX up a bit and Dow futs down a bit to reverse a bit of yesterday's moves. Qualcomm and ARM are set to report later.
European shares declined with the FTSE 100 down half a percent back to test the 10,700 region where it's been bumping around a couple weeks now with very little direction. Miners were dragged to the bottom of the FTSE 100 as copper sank 4% to a 3-month low on AI buildout slowdown fears, while precious metals remained under pressure with gold holding below $4,000/oz and silver down nearly 4% today to under $50, hitting a fresh one-year low and unwinding virtually all of the monster rip higher at the back-end of last year and early '26. ABF slipped around 2% on weak Primark numbers and 12% decline in profits, with the company announcing plans for online sales in Europe, where same-store sales were down 4.7%. Losses were heavier elsewhere with the DAX and Euro Stoxx 50 down more than 1% at the open before paring losses with semis down, – ASML –2%, Infineon –2.5% and software company SAP –3%. Industrials and Consumer Cyclicals were generally weaker.
European shares declined with the FTSE 100 down half a percent back to test the 10,700 region where it's been bumping around a couple weeks now with very little direction. Miners were dragged to the bottom of the FTSE 100 as copper sank 4% to a 3-month low on AI buildout slowdown fears, while precious metals remained under pressure with gold holding below $4,000/oz and silver down nearly 4% today to under $50, hitting a fresh one-year low and unwinding virtually all of the monster rip higher at the back-end of last year and early '26. ABF slipped around 2% on weak Primark numbers and 12% decline in profits, with the company announcing plans for online sales in Europe, where same-store sales were down 4.7%. Losses were heavier elsewhere with the DAX and Euro Stoxx 50 down more than 1% at the open before paring losses with semis down, – ASML –2%, Infineon –2.5% and software company SAP –3%. Industrials and Consumer Cyclicals were generally weaker.
3.Apple and Palantir slide despite earnings beating
Apple earnings beat on the top and bottom line but the bar is set incredibly high this earnings quarter and shares dipped ~3% in after-hours trading. Slightly soft margin guidance as it battles a hardware and memory price crunch, weaker China sales, and disappointing sales of iPads and Wearables were fixed on by traders. IPhone revenues were strong and only included 8 days of the new 18 Pro sales and no days of the foldable iPhone Duo, which didn't hit stores until after the quarter was over. The main concern is the margin pressure - memory costs are the main worry alongside the investment in Siri AI, while a shortage of memory could hamper Mac and iPad supply.
Palantir may have just passed an inflection point as US commercial revenue growth topped government sales for the first time. But again, the bar is set to high that top and bottom-line beats combined with raised full-year guidance weren't enough to prevent the stock sliding ~5% after hours. Revenues nearly doubled while earnings more than doubled on solid margin improvements. US commercial sales roes 148% while US government revenues rose 96%.
Palantir may have just passed an inflection point as US commercial revenue growth topped government sales for the first time. But again, the bar is set to high that top and bottom-line beats combined with raised full-year guidance weren't enough to prevent the stock sliding ~5% after hours. Revenues nearly doubled while earnings more than doubled on solid margin improvements. US commercial sales roes 148% while US government revenues rose 96%.
4.Marvell to buy Lumentum - markets hate it
M&A: Marvell bids to buy photonics firm Lumentum in a $115bn all-stock deal - a major test of the AI boom. Marvell work with hyperscalers on specialised AI accelerator chips that are an alternative to Nvidia, while Lumentum make components for data centres, specifically optical technology including lasers. Too much risk in one AI bet? The market doesn't like the combination as it might limit standalone upside potential for Lumentum in particular, with shares of both down at the bottom of the S&P 500 with Lumentum –19% and Marvell –13%. Meanwhile, SpaceX is reportedly in talks to buy Boost Mobile from EchoStar or use the network, as it seeks to build the infrastructure for a wireless network after it bought frequency spectrum for $8 billion last month.
5.Don't forget the Bank of England
Is the Bank of England decision a question of Households vs GDP? UK GDP has been stronger than feared, rising 1.8% in the three months to August on an annual basis, its best since 2022 when the economy was bouncing back from Covid. Manufacturing activity gathered pace in October, with expansion at a five-month high. This is inflationary - input prices rose at one of the fastest monthly clips in the past four years in October.
But households are not feeling the warm glow of productivity gains. The OBR said last week that real household consumption per head will not return to its pre-pandemic peak until early 2029. Would a hike really help households? Could the governor, Andrew Bailey, who has been cautious about talking up hikes, err on the side of households? Market pricing for 4 hikes this cycle is still too hawkish either way, but cable trades firmer again this morning above 1.34 with the 200-day SMA offering the key resistance at 1.34240.
But households are not feeling the warm glow of productivity gains. The OBR said last week that real household consumption per head will not return to its pre-pandemic peak until early 2029. Would a hike really help households? Could the governor, Andrew Bailey, who has been cautious about talking up hikes, err on the side of households? Market pricing for 4 hikes this cycle is still too hawkish either way, but cable trades firmer again this morning above 1.34 with the 200-day SMA offering the key resistance at 1.34240.