US Open – Earnings (Barclays, Verizon), Brexit, Oil, Gold

US stocks are poised for a mixed open as opposite earnings results from Amazon and Intel saw Nasdaq futures go through a tug-of-war.  While global indexes are grinding higher, safe-haven flows are still seeing decent demand for gold and Treasuries.  With markets focused on next week’s Fed decision and next month’s critical trade war update at the APEC summit in Chile, we could see some range trading over the next few trading sessions. 

Barclays

In Europe, the big quarterly report came from Barclays, a strong out-performance from their peers.  Strong income from fixed income and equities trading helped drive Barclay shares to the highest level in a year.  Brexit remains a headwind for the bank and that is they refrained from raising their targets on return on tangible equity.  The results were much better than expected and it will be tough for SocGen or BNP to match these results. 

Verizon

The telecom giant delivered strong results as they incur significant costs related to the launch of next-generation 5G wireless service.  The most expensive phone on the market saw total wireless subscriber growth of 601,000, well above the 536,000 analysts were expecting.  Verizon is underperforming some of their rivals and this earnings report could see them get some upgrades. 

Brexit

Anything Brexit related seems to go down to the wire.  As we approach the October 31st deadline, the British pound remains soft after the EU signaled, they agree on delaying Brexit but pushed back a decision on how long it will be. 

PM Johnson’s request for a December 12th election did not get any support from Labour as they remain committed to completely removing the no-deal Brexit option before agreeing to elections.  The risks of no-deal Brexit are slightly rising, but markets remain fairly optimistic next week will see Article 50 extended and a date set for elections. 

France complicated the EU’s decision on extending Brexit after vying for an extension to November 30th at the latest, much less than commonly agreed upon three-month extension.  France could be just posturing here for the UK and will probably strike a different tone if UK Parliament fail to agree upon Johnson’s proposal for an early general election. 

Oil

Oil prices have stabilized this week as global growth concerns have somewhat assuaged and on rising expectations that OPEC + will continue to assure tightness in the oil markets.  As rigs enter maintenance season and energy traders try to figure out how much of an impact the IMO 2020 marine fuel sulfur limit will have on oil prices, oil could continue to grind higher until meaningful progress is reached in global trade wars and on geopolitical risks in the Middle East. 

Gold

Gold is back above $1,500 an ounce level on expectations the Fed will deliver a third consecutive rate cut in what is becoming a very long mid-cycle adjustment.  The calls for easing cycle have eased, but markets will continue to price in further cuts as the Fed will continue to want to avoid any market disruptions.  Global stimulus bets are keeping gold supported here as US stocks continue to inch closer to uncharted territory.  With no-deal Brexit risks off the table and optimism running high that Presidents Trump and Xi will ratify the a mini-trade deal next month gold has been holding nicely.  The path to $1,600 an ounce remains intact, but the path will not be anywhere as steady as we saw earlier in the summer. 

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