UK & Europe
There were three G’s selling off in markets; the Great British pound, gilts and gold. An apparent shift in UK politics under the wing of Teresa May towards an interventionist and anti-business agenda was not received well in markets. The pound slid again in what has become a relentless barrage of selling, UK government bonds were sold and the FTSE 100 underperformed its European peers.
Weak corporate results and a degree of political uncertainty generated by Prime Minister Teresa May weighed on British stocks. A reported punch-up between UKIP politicians that led to MEP Steven Woolfe ending up in hospital did little to improve the UK’s image on the international stage.
Stocks in the rest of Europe were mixed coming off the highs after a soft start on Wall Street but supported by a rise in financial and oil shares.
Easyjet led the FTSE 100 lower after the budget airline issued a profit-warning. Banks traded higher with shares of RBS (LON:RBS) gaining over 2%. The IMF downplaying its concerns about Deutsche Bank (DE:DBKGn), the idea monetary policy could be tightening and Chancellor Hammond travelling to Wall Street to sweat talk bankers helped bank shares gain ground.
Shares of Easyjet plummeted as much as 8% after the profit warning. It seems to have finally hit home in markets how difficult life for Easyjet is going to be after the terrorist attacks in Europe, the attempted coup in Turkey and the drop in the pound.
US
Stocks in the US dipped in early trading with markets remaining very range-bound ahead of this week’s jobs report and the beginning of the Q3 earnings season.
The rhetoric from Federal Reserve members, including Vice Chair Stanley Fischer overnight have maintained a hawkish bias so investors are waiting to see whether that matches up with the economic data.
Shares of Twitter nose-dived 17% in early trading on Thursday following reports neither Google (NASDAQ:GOOGL) nor Disney are interested in acquiring the social media firm. Microsoft (NASDAQ:MSFT) has its LinkedIn (NYSE:LNKD) purchase to deal with and Apple (NASDAQ:AAPL) is an unlikely suitor. That just leaves Salesforce with a possible interest in Twitter. With all the bidders taking flight, it’s beginning to look like corporate buyers think Twitter is as much of a difficult buy as investors have over the past three years.
Shares of Walmart (NYSE:WMT), the world’s biggest retailer dropped 3% despite maintaining its profit guidance after it reported a massive increase in its expenditure on its online division.
FX
Sterling saw more dramatic declines to a fresh three decade low on Thursday amid an increase in political uncertainty and question marks over the British government’s fiscal prudence. The new government under Teresa May has shown itself to be quite a different beast to the one run by David Cameron. The end of austerity and economic interventionism are new developments for markets to contend with.
The decline in the pound was more prolific against the dollar than the euro because of broad-based dollar strength. An expectation is building that tomorrow’s US unemployment could justify the high expectations in the market that the Fed will raise rates for the first time this year in December.
Commodities
The dollar strength and rise in the long end of the yield curve has weighed heavily again on precious metals prices. The price of gold slumped over 1% and is nearing $1250 per oz.
Oil prices continued to gain strength with WTI crude gaining a foothold above $50 per barrel after this week’s surprise US inventory drawdown added to bullish sentiment built up after last week’s OPEC decision to cut output.
"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "