- FTSE 100 set to open in the red.
- UK credit defaults stable but ‘higher for longer’ weighs on new mortgages.
- US futures down.
- Investors zone in on bad debts at America’s regional banks.
- Consumer credit in focus ahead of AMEX Q3 print.
- Bitcoin finds a floor as gold heads for another breakout.
- Oil prices head for third weekly drop in a row.
Derren Nathan, head of equity research, Hargreaves Lansdown:
“The FTSE 100 is set to open down after yesterday’s uneventful session. With global credit conditions dominating the narrative, investors in UK Plc should take some comfort that the Bank of England’s third-quarter credit conditions survey didn’t reveal an upward trend in unsecured lending defaults. Mortgage lending for new house purchases was unchanged, and lenders aren’t expecting a further uptick this year, reflecting the ‘higher-for-longer’ rates environment.
US stock futures are down today, as credit concerns compound the jitters over an escalation in US-China trade tensions and the ongoing government shutdown in Washington. This comes after Wall Street closed lower on Thursday. Despite growing hopes of further rate cuts this year, attention is turning to the underlying health of the economy, as emerging credit losses amongst America’s regional banks raised further questions about lending practices.
That’s done little to calm jitters about contagion from the bankruptcy of auto parts supplier First Brands, after it racked up billions of dollars in off-balance sheet trade financing agreements. This sort of debt can be difficult to map and it will take a while for the saga to play out. But on the flipside, the big US banks remain well capitalised and appear to be in rude health after Goldman Sachs, JPMorgan, Citi and Wells Fargo all beat Q3 estimates earlier in the week.
Consumer credit will be in the spotlight today as American Express updates on its third-quarter results. Analysts are expecting solid growth in both revenue and earnings per share, which are forecast to land at $18.1 billion and $4.00: respective annual increases of 8% and 15%. It’s already released its US delinquency stats for the period, with 30-day retail ‘past due’ levels relatively stable at 1.3% in July and August and 1.4% in September. There was nothing overly concerning for US Small Business Card Member loans either, with a rate of 1.6% in each of the three months.
Bitcoin prices have halted their slide but remain under $110,000, after shedding around 3% in the previous 24 hours. Selling pressure from crypto miners and liquidations of exchange traded funds have been driving the sell off. This contrasts with the continuing flight of capital to perceived safe havens, with US 10-year Treasury yields falling below 4% and gold closing in on the $4,400 level.
Prices for Brent Crude oil have slipped below $61 per barrel. Prices have now fallen for three consecutive weeks, having shed nearly $10 per barrel over the last month. Proposed talks between Presidents Trump and Putin have raised hopes of an end to the war in Ukraine, and by implication, restrictions on Russian oil exports. However, when it comes to peace in the region, there have already been several false dawns. Another large build in US crude inventories is also weighing on the outlook, as trade tensions raise question marks around the demand outlook. Forecasts expected an increase of just 0.1 million barrels last week but according to estimates by the American Petroleum Institute oil storage leapt by a much bigger margin of 7.4 million barrels.”
