Today’s headlines

What’s happening: Shares of American Express fell on Friday after the company reported results for the third quarter.

What happened: The credit card giant reported stronger-than-expected quarterly earnings.

The recent earnings beat was driven by the resiliency of its premium customer base, which continued to spend despite economic growth concerns.

How were the results: The New York-based company reported a low double-digit increase in revenues for the third quarter.

• Revenues grew by 13% year-over-year to $15.38 billion, surpassing the consensus estimates of $15.36 billion.
• Profits surged 30% to $2.45 billion, while earnings came in at $3.30 per share, topping Wall Street expectations of $2.94 per share.

Why it matters: Soaring inflation and continued rake hikes by the Federal Reserve have impacted discretionary consumer spending in the US. AmEx was able to mitigate the impact of this with higher activity by its affluent cardholders.

The company’s card member spending rose by 7% on an FX-adjusted basis to $420 billion, while total network volumes grew 7% year-over-year to $420.2 billion.

US consumer services revenues climbed 16% year-over-year to $7.2 billion, while commercial services revenues rose 7% to $3.7 billion. International card services revenues came in at $2.6 billion, up 17% year-over-year.

AmEx increased its provision for credit losses by 58% compared to last year to $1.23 billion, but this was up only 3% versus the prior quarter.

“Overall card member spending was strong, and credit performance remained best-in-class, reflecting its premium global customer base,” CEO Stephen J. Squeri said during the earnings call. “Travel and Entertainment spending remained robust. Restaurant spending was again one of its fastest-growing T&E categories, and the Resy restaurant platform continued to generate high user engagement,” he added.

AmEx reiterated its revenue growth and earnings guidance for the full year of 15%-17% and $11-$11.40 per share, respectively.

How shares responded: AmEx’s shares fell 5.4% to close at $141.57 on Friday, following the release of quarterly results. The stock has lost around 8% over the past month.

What to watch: Investors will continue monitoring inflation levels and the Fed’s upcoming interest rate moves.

The markets today

The British pound will be in focus today ahead of major economic reports this week

Context: The sterling fell to its weakest level in five months versus the euro on Friday, but pared losses as the session progressed.

Details: The British currency came under pressure in early trading on Friday following UK’s weak retail sales report, which fuelled concerns around the economy.

A higher-than-expected decline in British retail sales exerted pressure on the sterling. Retail sales volumes fell by 0.9% in September, following a 0.4% increase in August. This was significantly higher than market expectations of a 0.2% decline. The GfK Consumer Confidence indicator also worsened to -30 in October, from -21 in the prior month.

Other data released last week showed inflation remaining at 6.7% in September, higher than market expectations of 6.6%, despite several rate hikes by the Bank of England in recent months.

The sterling, which is typically highly sensitive to global market sentiment, fell on heightened geopolitical unrest and a sharp increase in US yields. Strength in the US dollar also exerted pressure on the British pound. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell 0.1% to 106.16 on Friday.

The EUR/GBP pair rose to as high as 87.40 pence earlier in the session, notching its strongest level since May, but pared gains as the session progressed. The forex pair lost 0.01% to 87.12 later on Friday.

The GBP/USD pair declined in early trading and recovered later in the session. The forex pair gained around 0.2% to 1.2165 on Friday, trading higher than the six-month low of 1.20585 recorded earlier this month.

London’s FTSE 100 fell by 1.3% to close at 7,402.14 on Friday.

What to watch: Investors await economic data on unemployment rate, manufacturing PMI, services PMI and labour productivity, due to be released on Tuesday. The unemployment rate in the UK, which increased to 4.3% in the three months to July, is expected to remain unchanged in August.

The S&P Global/CIPS UK manufacturing PMI is projected to increase to 44.9 in October, from 44.3 in September, while the services PMI is expected to improve to 49.8, from 49.3 in the previous month.

Other Markets: US trading indices closed lower on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.86%, 1.26% and 1.50%, respectively.

The news shaping the markets

Russia’s foreign minister, Sergei Lavrov, has plans to visit Tehran and holding talks with regional counterparts this week. The news sent the safe-haven US dollar index slightly higher this morning.

Moody’s credit rating agency lowered its negative outlook on the UK. Despite this, the GBP/USD forex pair remained under pressure.

The US government recorded a budget deficit of $171 billion in September. Although this was much better than the $430 billion gap reported last year, the Nasdaq 100 index declined by 200 points on Friday.

Argentina reported a trade deficit of $793 million for September. This being the seventh straight month of trade deficit exerted pressure on the ARS/USD forex pair.

Colombia’s trade deficit narrowed to $1.06 billion in August, versus $2.36 billion in the year-ago month, which sent the COP/USD pair higher in forex trading this morning.

What else to watch today

Turkey’s consumer confidence indicator, Mexico’s economic activity, US Chicago Fed National Activity Index, Eurozone’s consumer confidence indicator, as well as Central Bank of Brazil’s focus market readout.