Europe
Volatility is non-existent in European equities as the public holiday in the US has caused markets on this side of the Atlantic to trade sideways. There were some economic announcements from the UK and the eurozone, such as construction data and producer price index (PPI) but the reaction to both was muted. European indices have been edging lower over the past number of weeks, and traders are wondering is it just a pullback from the from the positive run in the first-half, or could a larger correction be getting under way.
Shares in Worldpay (LON:WPG) soared today after the company said it was approached for takeover by JPMorgan Chase (NYSE:JPM), Vantiv (NYSE:VNTV), and Nets A/S (CO:NETS). They expressed interest in the payments company over the weekend. Worldpay handles in excess of 40% of UK payments and it’s a textbook example of a 'scramble for a successful' because others showed an interest.
US
The New York Stock Exchange (NYSE) is closed today as it is the fourth of July. There is reduced trading hours for the US index futures, and market volatility is low and volumes are thin. The futures market for the Dow Jones and the S&P 500 are a touch higher from last night’s official close.
FX
The GBP/USD edged lower today as the US dollar is the preference of dealers at the moment. The UK construction sector expanded in June, but the rate of expansion was slower than expected. The report didn’t have a huge impact on the performance of the pound, but when you take into account the slowing growth rate of British manufacturing from yesterday, it weighs on sterling’s prospects. Bank of England members, Mark Carney and Andy Haldane made hawkish statements last week, but the economic announcements would need to be firmer before action should be taken.
The EUR/USD has lost ground as the greenback presses higher. Last week we saw the single currency hit its highest level versus the US dollar in one year, and now profit taking is hurting it. Eurozone producer price index (PPI) for May was -0.4% on the month and rose by 3.3% on the year, while the market was expecting -0.2% and 3.5% respectively. This caused additional problems for the euro.
Commodities
Gold has bounced back a small bit after the severe sell-off yesterday that saw it fall through the 200-day moving average at $1235. The metal is now off the seven-week low, but the move higher today has been relatively small when compared with the $21 dollar plummet yesterday. The commodity has been in decline for nearly one month, and during that time the US dollar has broadly weakened, which is concerning for gold.
Brent crude and WTI haven taken a breather from their major rally. The energy was already pushing higher when US oil production dipped by 100,000 barrels per day and the number of active rigs in the US fell by 2. Admittedly, it won’t put much of a dent in global supply, but it was certainly music to the bull’s ears. Oil market is not unaccustomed to large retracements after entering bear markets, so the pause we are seeing at the moment, could just be the halfway mark of the move higher.
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