UK and Europe
European markets were rising strongly by Tuesday afternoon, bolstered by a confident open on Wall Street after data showed a slowdown in Chinese producer price deflation. Shares in Greece surged after Monday’s Eurogroup meeting seemingly brought an agreement on debt relief closer to hand.
A recovery in commodity markets, which were led sharply lower on Monday by a slump in iron ore prices, eased concerns of another rout. Equities and oil prices remain very interlinked, with both markets having topped in late April and moving higher in unison on Tuesday.
A smaller than expected loss at Credit Suisse (SIX:CSGN) has been a positive influence on the European banking sector.
Well-received earnings reports from Easyjet (LON:EZJ) and Capita (LON:CPI) as well as a boost to UK bank stocks after Credit Suisse (SIX:CSGN) beat first quarter estimates saw the FTSE 100 break to the highest in four days. Standard Chartered (LON:STAN) and Barclays (LON:BARC) were amongst the top risers on the UK benchmark.
The improvement in Chinese inflation data is a better gauge on the global growth outlook than weakness in French and German industrial production, which unexpectedly fell in March thanks to a slowdown in the auto sector. China producer deflation slowing is a positive sign for China’s commodity-sensitive manufacturing economy, though probably doesn’t move the dial on the PBOC’s decision whether or not to ease monetary policy.
US
US stocks opened strongly and gained momentum in early trading sending multiple American blue-chip companies including McDonalds (NYSE:MCD), Amazon (NASDAQ:AMZN) and Johnson & Johnson (NYSE:JNJ) to new record highs.
Shares of Allergan (NYSE:AGN) rose after the drug-maker reported better than expected earnings and announced a $10bn stock buyback program. The buyback program is an attempt to attract investors who left in droves after the failed takeover by Pfizer (NYSE:PFE).
Shares of Gap (NYSE:GPS) dropped sharply after reporting monthly sales numbers in a repeat of the reaction from last month. The clothing company also issued a profit warning blaming weak demand at its Banana Republic and Old Navy stores.
FX
The US dollar was mixed on Tuesday with a reported rise in job openings giving it a slight positive bias. The not-so widely followed JOLTS survey goes some way to suggest that the drop in the April payrolls number is not the beginning of a new trend of fewer US jobs being created.
The Australian dollar rose alongside the rebound in commodities whilst the Japanese yen continued to retreat following yesterday’s jawboning from Japan’s finance minister.
The British pound was firmer against the euro and the US dollar, brushing off data showing the biggest trade deficit since the first quarter of 2008.
Commodities
Canadian wildfires have been subsiding but the associated downdraft in oil prices appears to have moderated, helped by the possible supply impact of an outage in Nigeria.
Gold prices hovered below yesterday’s lows amid better US economic data and rise in equity markets that reduced demand for havens. So far gold has not been able to sustain gains above $1300 per oz thanks to a recent strength in the dollar.
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