Global Markets Sink on Risk Re-pricing

Wednesday, October 10: A downbeat end to trading on Wall Street yesterday saw London open lower as investors awaited UK economic data. As the day grew old global risk assets descended further into the red as investors pondered the IMF’s downgrade to forecast global growth and the consequences of rising Treasury yields. These worries and sterling strength on the hope of further Brexit progress pushed the FTSE 100 to a six month intraday low.

Q3 UK GDP data defied expectations of a 0.6% read, posting a figure of 0.7% quarter on quarter as economic growth was lifted by stronger retail sales and housebuilding in response to unseasonably warm weather, equivalent to 2.8% on an annualised basis. A decent GDP beat was accompanied by a widening current account due to a visible trade deficit increase and a primary income shortfall(services).

One of the prominent FTSE 100 fallers was Burberry(-8.12%) following a read-across from French rival LVMH Moet Hennessy Louis Vuitton which declared Q3 revenue which fell short of expectations, despite a sales increase of 10%. Weaker performance in select areas of the business was attributed to extreme climate events in Hong Kong and Japan, though a bear note on the luxury goods sector from Morgan Stanley citing a peak in Chinese consumer confidence condemned the sector lower.

HSBC will pay $765m to settle Department of Justice claims that it wilfully covered up risks associated with residential-mortgage products in the run up to the financial crisis. In related news, Standard Chartered CEO Bill Winters said the business was working towards an “acceptable resolution” with U.S. authorities in relation to historic misdemeanors; a minimum fine of $1bn is expected.

At the close European equities were lower with the FTSE 100 -1.27%, the CAC 40 -2.11% and the DAX 30 -2.21%.

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