Sterling unchanged as EU leaders agree to a flextension
UK stocks declined after a surprise earnings miss by Europe’s biggest bank, HSBC. The bank’s net profit declined by 24% in the third quarter to $2.97 billion. Revenue declined by 3.2% to $13.35 billion. In the statement, the company said that results in some regions were unacceptable. It also dropped its profit targets and announced significant changes. On targets, the bank said that it would abandon its plan of generating a return on tangible equity of more than 11% in the coming year. Just this month, the company announced its plans to slash 10,000 jobs. This was in addition to the layoffs the bank had reported early this year. European banks like Deutsche Bank, Credit Suisse, and UBS are battling a slowing economy and negative interest rates.
Sterling was relatively unchanged against the euro and USD after European leaders voted to give the UK a three-month extension on Brexit. The members of the 27 European countries will now sign the extension request. The flextension implies that Brexit could happen on December 1, or January 1, if the deal passes EU and UK parliaments before December. The main reason why the sterling was unchanged was that the extension was already priced-in. Meanwhile, the market is waiting to see whether the UK parliament will accept Boris Johnson’s proposal of a December 12 extension.
US futures rose after a series of positive market news. On Sunday, it was announced that Bernand Arnaut’s LVMH had made an offer to acquire Tiffany, the US luxury retailer. Tiffany rejected the unsolicited offer, saying that the French conglomerate had undervalued it. Tiffany stock rose by 20% in premarket trading. Microsoft stock rose by 3% in premarket trading after the company won a major contract by the Department of Defense. The deal will help the department transition to the cloud and is worth $1 billion every year. Still, it is widely expected that Amazon will sue to block the deal. An insider revealed that Trump had instructed Jim Mattis to “screw Amazon”. Trump has never been a fan of Amazon because of its owner Jeff Bezos, who owns The Washington Post.
EUR/USD pair moved up as the German import price index rose by 0.3%. This was higher than the consensus estimates of 0.2%. On the hourly chart, the 14-day and 28-day moving averages appeared to be making a bullish crossover while the RSI has been on an upward trajectory. The Force index remained unchanged. The pair may remain in this holding pattern ahead of Wednesday’s Fed decision.
GBP/USD pair remained in a holding pattern today. The pair is trading at 1.2830, which is slightly higher than Friday’s low of 1.2790. On the hourly chart, the pair is between 100% and 61.8% Fibonacci Retracement levels. The Average True Range has continued to weaken, which is a sign of falling volatility. This could be a sign that the pair may break out in either direction soon.
FTSE100 declined today after the disappointing earnings call by HSBC. The index declined to a low of £7290. It then pared some of those losses after the EU agreed to give the UK another extension. The index is trading at £7315. On the hourly chart, the index is trading along the middle line of the Bollinger Bands. ATR indicator has continued to rise while the Parabolic SAR dots are above the price. The On-Balance-Volume increased sharply. The index may continue moving upwards to retest the previous high of £7336.