Europe
Stocks in Europe sold-off as the sudden and severe decline in the Nikkei 225 overnight trigged fears around the world. Lately stock markets in Europe have been lacklustre as there has no major change to the economic or political outlook. The low volatility was interrupted today by the rapid drop in the Japanese market, which got traders out of their comfort zone in Europe. The sell-off is broad based, and when you look back at how much ground was made in 2017, dealers don’t need much of an excuse to exit the market.
Sainsbury's (LON:SBRY) announced a 9% fall in underlying pre-tax profits and a 1.6% drop in like-for-like sales – not including fuel. The UK supermarket sector has become very competitive in recent years with the rise of Aldi and Lidl. Making matters worse, the mediocre wage growth and the rising inflation means the British consumer is being squeezed. The stock is down1.7%, and fell to a level not seen since December 2016.
Burberry (LON:BRBY) updated the market with its figures for the first six months of the year and its strategic plans, and neither went down well. Pre-tax profits jumped by 24%, but fell short of analysts’ expectations. The fashion house will shut down a number of stores and focus more on the higher end of the luxury goods market. The remodelling cost of the stores gave traders a reason to lock in profits.
US
Wall Street has been caught up in the global sell-off in equities, and seeing as US indices have been enjoying a very bullish run recently, investors decided to take some cash off the table.
The same old concerns about delays to the US tax proposal are doing the rounds, and that was already wearing on investor sentiment, so the Japanese decline made dealers extra jittery.
Macy’s (NYSE:M) managed to exceed its earnings per share (EPS) estimate even though same-store sales slipped. The retailer improved efficiency on inventory and that control that helped offset the drop in revenue. The share price is up 5.9% today, but it has been in a strong downward trend since July 2015. If the stock re-took the $30 mark, it might snap out of is downtrend.
US initial jobless claims ticked higher to 239,000 from 229,000 last week, while economists were only expecting a jump to 231,000.
FX
EUR/USD is higher after the European Commission (EC) raised its outlook for the eurozone. The region has been producing solid economic indicators in recent months, and now that the easing programme in place by the European Central Bank (ECB) has been extended until September 2018, the region will continue to be assisted.
GBP/USD is largely unchanged as a lack of economic indicators from the UK today couldn’t muster up any interest in the currency pair. The US dollar is broadly lower today, while the pound can’t make any head way against it – which is concerning. Sterling has been subdued lately, but the broad bullish move that has been in place since March in still intact. If it holds above the $1.3000 mark, its outlook may stay bullish.
Commodities
Gold is higher on the session as the dip in the US dollar and the sell-off in global equities has made the metal attractive. Gold is taking advantage of the risk-off strategy adopted by traders, as they seek out safe haven assets. Gold has been range bound lately, and it would need to clear $1306 in order for traders to become more bullish on the asset.
WTI and Brent Crude are higher on the day as the corruption crackdown in Saudi Arabia, and the heightened tensions between the Saudi’s and the Iranians is making traders fearful for future supply levels. Saudi Arabia has warned its citizens not to travel to Lebanon, this is also playing into the mix as it seems that region is unstable at the moment. Brent Crude oil is still above its 200-week moving average at $62.50 – which is a sign of market strength. Meanwhile, WTI is eying up its 200-week moving average at $58.58.
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