Early Morning Call: UK public sector net borrowing narrows in October

Equity market overview

We've seen a hesitant start to the day on the European equity market, after US indices declined yesterday, and following a mixed session in the Asia-Pacific region. In China, more cities resume mass Covid testing, as the country fights a spike in cases.

After the fiscal statement last week from the new Chancellor of the Exchequer, Jeremy Hunt, gave what was generally seen as a budget to restore fiscal credibility, today the UK's public finances are back in the spotlight. Public sector net borrowing has narrowed to £13.5 billion in October, lower than expectations, after a revised £17.8bn in September.

At 3pm we see Eurozone consumer confidence flash. The index is expected to rise to -26 in November from -27.6 the previous month.

Elsewhere, watch out for AO World at the open. The group reported a 17% decline in revenue to £546 million. Adjusted EBITDA fell 11% to £9m.

It its statement, AO World says it is not immune to the challenging and uncertain consumer environment and expects to continue to be impacted by both the cost of living crisis affecting consumer spending, as well as by ongoing supply chain issues.

Zoom Video Communications shares fell more than 8% in extended trading after it lowered its annual revenue forecast. Zoom earned $1.07 per share during the quarter, compared with estimates of 83 cents. Revenue rose 5% to $1.1 billion, on the back of a 20% increase from high-paying enterprise customers, the so-called $100,000+ customers.

Zoom even raised its annual adjusted profit per share to between $3.91 and $3.94, compared with $3.66 to $3.69 forecast earlier, but investors were disappointed by one announcement: online business will decline nearly 8% during the year. Zoom now expects annual revenue to be between $4.37 billion and $4.38 billion, compared with an earlier outlook of $4.39 billion and $4.40 billion.

Dell posted quarterly adjusted earnings of $2.30 per share. The mean expectation of 15 analysts for the quarter was for earnings of $1.61 per share. Revenue fell 13% to $24.72 billion from a year ago; analysts expected $24.42 billion.

Another computer maker is scheduled to report tonight after the US closing bell. Analysts anticipate HP Inc to post earnings of 84 cents per share, down 10% year-on-year (YoY), and a 12% decline of its revenue on an annual basis to $14.74bn.

If PC sales are expected to decline, analysts expect that HP's printer business will be strong enough to keep overall sales flat with the prior quarter.

Best Buy is set to posts its quarterly earnings before market opens. Analysts expect earnings of $1.03, half of that recorded during the same quarter a year ago per share. Revenue is expected to decline by about 13% on an annual basis to $10.32bn.

Best Buy is a technology retailer that finds itself in a very difficult situation is the current economic context of soaring inflation and potential recession. Shares have fallen more than 40% over the past 12 months.

Also in the retail sector, Dollar Tree and Abercrombie & Fitch are set to publish quarterly earnings today.

Could Genesis be the next casualty of the cryptocurrency crisis?

Yesterday a report from Bloomberg News revealed that the cryptocurrency lender, Genesis, was struggling to raise fresh cash for its lending unit and may need to file for bankruptcy if it does not find funding.

Genesis responded shortly after the report, saying its goal is to resolve the current situation consensually without the need for any bankruptcy filing, adding that it continues to have conversations with creditors.

Days after the collapse of crypto exchange FTX, this latest announcement was enough to send Bitcoin to a new two-year low.

Commodities

On the commodities market, oil prices seem to have settled after their recent decline.

WTI and Brent broke September support to briefly fall to levels not seen since early January. The market fears demand in China will slow as the number of Covid cases rise.

We've seen a similar situation in the base metals market. Copper, zinc, aluminium, nickel are all showing small gains this morning after declines that started early last week.