Investors given reasons to be optimistic at the start of November

5 November

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Market news

Developed equity markets have made a strong start to the week. European equities enjoyed their biggest gains in three weeks yesterday, while stocks in Asia were lifted by global trade optimism. The S&P 500, meanwhile, has reached a fresh record high. Overnight, markets also responded well to the People's Bank of China reducing the cost of one-year funds to banks for the first time since 2016.

Last week, the Federal Reserve cut interest rates for the third time this year in an attempt to extend the current protracted period of economic growth. However, in spite of pressure from President Trump, who has an election next year, the central bank's chair, Jerome Powell, said that there was a limit to what the Fed could do and that loosening fiscal policy would be more effective.

Chinese President Xi Jinping has made positive comments regarding the country's approach to international trade, saying that Beijing will give greater importance to imports and lower tariffs and transaction costs. On the other side of the negotiating table, a US official has revealed that the fate of December's planned tariffs is being considered as talks between the two countries progress.

In the UK, construction activity contracted for a sixth consecutive month according to the IHS Markit's Purchasing Managers' Index (PMI). The reading actually rose from 43.3 to 44.2 in October, but Brexit uncertainty and economic sluggishness leaves the construction sector in a “sustained decline” nonetheless. The UK's services PMI beat expectations last month to reach a neutral reading of 50.0, but the details still paint a challenging picture. Activity was supported by existing contracts rather than new business.

Today is Parliament's last day in Westminster before being dissolved ahead of December's general election and sparring between candidates is already well under way. Research by the Centre for Policy Studies has estimated that Jeremy Corbyn's aim to introduce a four-day working week would cost the taxpayer at least £17bn a year via the public sector wage bill alone. The Confederation of British Industry added that it could push “many businesses into loss”.

Stock focus

Associated British Foods announced its full-year results this morning and confirmed that it is pushing ahead with plans to expand Primark's presence in the US. ABF said that US consumers have given the discount retailer a positive reception and that its store model is profitable. Group operating profit slipped 5% to £1.2bn owing to a difficult year for its sugar business.

Full-year profits at Imperial Brands were marginally ahead of forecasts this morning, following a profit warning in September that was largely due to the poor performance of next-generation smoking alternatives. Net tobacco revenue for the year was £7.7bn and earnings for the year to October were £3.35bn.

Shares in gambling companies suffered yesterday after a collection of MPs called on the government to tighten the regulations around online betting. The proposals included subjecting online casinos to be subject to the same limits as those introduced for slot machines. William Hill fell 12.7% and Flutter Entertainment, the owner of Paddy Power and Betfair, led the fallers on the FTSE 100.

Ryanair exceeded expectations in its half-year results yesterday by delivering first-half profits of €1.15bn, meaning performance was flat compared to last year. The airline has to lower forecasts for its passenger numbers next year, however, because Boeing's 737 Max aeroplanes remain. Ryanair had been due to take delivery of 58 new planes.

Mothercare is set to put its UK business into administration, putting more than 2,000 jobs at risk at its 79 UK stores. It said its UK retail operations are "not capable" of achieving a sufficient level of profitability and that so far it had failed to find a buyer. The company is reportedly working on a deal to protect its pensions schemes by transferring them to its parent company.

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