Must read: FTSE 100, Shell, Unilever, Foxtons, Credit Suisse

The blue-chip index is outperforming amid a slew of third-quarter earnings.

GLOBAL MARKETS

European markets have opened mostly lower with the FTSE 100 outperforming. Shell (LSE:SHEL) is at the top of the UK index thanks to upbeat third-quarter earnings, while BP (LSE:BP.) is also rallying in its slipstream. Meanwhile, Unilever (LSE:ULVR) is in positive territory thanks to its latest results.

Focus turns to the European Central Bank’s rate decision at lunchtime, which is expected to announce the second 75 basis point hike in a row as it looks to get to grips with inflation in the eurozone. In the US, investors will be looking for further signs of an economic slowdown stateside with the release of its latest GDP growth figures.

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In terms of notable earnings, Credit Suisse (NYSE:CS) has opened down by more than 7% after reporting a major third-quarter loss of 4 billion Swiss francs and announcing a strategic overhaul. Last night, shares in Meta Platforms (NASDAQ:META) plunged almost 20% after-hours on the back of rising costs and the slowest sales growth since its IPO in 2012. Third-quarter net income slid by 52%, falling short of analysts’ expectations, while its bet on the metaverse faced scrutiny given its lack of success so far.

SHELL

Shell (LSE:SHEL) reported third-quarter profits of $9.45 billion ahead of analysts’ estimates for $9 billion but below the previous quarter’s record earnings of $11.5 billion. The oil giant also announced a share buyback programme worth $4 billion to be carried out over the next three months and confirmed it is increasing its dividend per share by 15% for the current quarter. Earlier this month, Shell warned that weaker natural gas trading and a rise in refining costs would negatively impact profits.

The war in Ukraine and the corresponding surge in commodity markets brought about two consecutive quarters of record results for Europe’s biggest oil and gas company. This allowed Shell to generously return cash to shareholders through its dividend and share repurchase scheme. However, with the summer’s declining oil prices, shrinking refining margins and volatile and dislocated markets negatively impacting its gas trading business, profits have fallen from the highs, although they are still more than twice its earnings in the same quarter last year.

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The current quarter looks brighter for Shell thanks to recent bullish oil price momentum driven by OPEC+’s decision to sharply cut production at the start of October. The oil giant looks set to enjoy a tailwind from Brent crude’s more than 12% jump over the last month, reversing some of the recent oil market downtrend. Amid the equity market turmoil, oil & gas has been a major pocket of outperformance this year with investors in Shell benefiting from its dividend, share buyback and share price appreciation of nearly 40% year-to-date.

UNILEVER

Unilever (LSE:ULVR) has raised its full-year underlying sales growth guidance from 4.5%-6.5% to 8% after third-quarter sales growth hit 10.6%, topping estimates for 8%. Although sales volumes declined during the quarter, the prices paid by consumers rose sharply by 12.5%. However, the consumer goods giant struck a cautious tone warning that cost pressures will continue into next year while highlighting the challenges facing some of its main markets including across Europe and in China.

Unilever is facing immense pressures from cost inflation across the board including on wages, ingredients, and energy bills, which are negatively impacting profit margins. On top of that the cost-of-living crisis and squeezed household budgets are having a dampening effect on sales volume growth which is in decline. To offset cost pressures and slowing demand, Unilever has managed to successfully boost revenues by introducing its highest ever series of quarterly price increases. Similar to its rivals such as Reckitt Benckiser Group (LSE:RKT), the biggest risk for Unilever is if consumers trade away from branded products to cheaper alternatives instead. Aside from that, as a vendor of consumer staples, Unilever is relatively well positioned to weather an economic downturn. Shares are up around 8% over the last six months.

FOXTONS

Foxtons Group (LSE:FOXT) said it expects annual results to beat its previous expectations thanks to strength in its letting business. Third-quarter revenue rose by 25% to £43.8 million with lettings transactions up 4% to £29.2 million. However it warned of a ‘less certain sales market backdrop’ in the current fourth quarter.

Foxtons is grappling with the recent surge in mortgage rates driven by the Bank of England’s rate hiking path and accelerated by the chancellor’s mini-budget fiasco. The increased mortgage costs are having a sharply negative impact on demand for houses and flats, which is likely to weigh on the estate agent’s sales division this quarter, particularly as we head towards the seasonal lull in activity around Christmas. It is also much more difficult for first-time buyers to get on the housing ladder, with many potential buyers likely to hold off until the mortgage market normalises again. Concerns around a UK recession and the political uncertainty in Westminster may also deter foreign buyers from looking at property in London and elsewhere, which could also weigh on the capital’s largest estate agent. Plus the cost-of-living crisis is also reducing potential homeowners’ budgets when it comes to paying for a mortgage.

Arguably all of this may play into the hands of Foxtons’ letting division, as customers look to rent instead of buy given the decreased affordability of mortgages and the squeeze on household incomes from inflation. Optimism towards rental demand is boosting Foxtons’ share price sharply this morning. However even after today’s gains, shares in Foxtons have struggled lately and are still trading down around 20% year-to-date.