UK stocks stalled on the first day back after the August bank holiday weekend in thin trading. The FTSE 100 was basically unchanged whilst the FTSE 250 lost around half-a-percent.
Industrials were top gainers following well-received results from packaging company Bunzl (LON:BNZL) whilst Basic Material stocks were the biggest drag as copper prices came close to two-month lows. Shares of Petrofac (LON:PFC) were slightly lower after returning a first half profit.
The distribution business and cleaning products supplier is more flush than flash, but Bunzl's steady returns have made it a defensive favourite and shares have struck another record high following well-received first-half results.
Investors on the continent were more upbeat, with shares on the German DAX and French CAC both higher. An unexpected fall in German inflation boosted the prospect for stimulus from the European Central Bank.
US
US stocks dropped in early trading as Apple's (NASDAQ:AAPL) European tax problems weighed on broader sentiment.
The world’s biggest company by market capitalisation held a conference call after it was stung with a 13bn euro penalty for tax avoidance. Apple’s special tax deal with Ireland, where it has been paying very low corporation tax for decades, has been deemed illegal state-aid by the European Commission.
Ireland is being forced to recoup the back-taxes retroactively but will appeal the decision. The risk for Ireland is that by taking 13bn from Apple, there will be a mass exodus of American firms and a resulting loss of jobs and investment.
Nobody would dispute that corporations need to pay their fair share of tax, but a retroactive cash-grab creates uncertainty and could impact investment in Europe. Apple’s troubled tax situation will cast a long shadow over the revenue-boosting hopes of new product launch on September 7.
Shares of US chocolate-maker Hershey (NYSE:HSY) dropped by double digits after Mondelez, which owns Cadbury’s, announced it is abandoning its takeover bid. Mondelez could have ‘sweetened’ its offer but management was unwilling to match the $125 per share reportedly asked for by majority-shareholder, The Hershey Trust.
FX
The US dollar was mostly firmer on Tuesday, extending gains in the wake of Fed Chair Yellen’s testimony at Jackson Hole. A relatively benign interview from Vice chair of the Federal Reserve Stanley Fischer and data showing a slight slowdown in house prices did little to move the dial on sentiment towards the greenback.
The euro fell after German inflation unexpectedly fell in August. Germany’s harmonised CPI rose 0.3% year-over-year in August, lower than the 0.4% in July and 0.5% expected. If inflation trends are seen to be weakening, it gives the ECB scope to add to stimulus to defend Europe from possible risks of Brexit.
The Japanese yen fell amidst a rise in US treasury yields.
Commodities
Oil prices ticked slightly higher on Tuesday. The shutdown of some output in the Gulf of Mexico amid what could become a tropical storm helped oil prices edge slightly higher before US inventory data from the API.
A report from consultants Wood Mackenzie has indicated oil discoveries have hit a 70-year low. The market’s focus is on the supply/demand imbalance in the next six months where US shale and full-tilt OPEC output outweighs the cut-down exploration. Long term, the lower exploration necessarily means lower production and is bullish for oil prices so long as demand hold up.
Gold prices slipped back below $1320 per oz. Increasing bets over a September rate-rise following Fed Chair Yellen’s testimony at Jackson Hole is pressuring gold. Gold could finally see $1300 per oz give way if US nonfarm payrolls come in ahead of expectations on Friday.
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