Europe
European equity markets had a good run in the morning but have stated to slip as the day has gone on. It is a bit concerning to see European stocks slide around the same time that major indices in the US all hit record highs.
The FTSE 100 has been range bound for July as traders can’t seem to make their mind up either way. Some hawkish comments from Bank of England (BoE) members in recent weeks has shaken the London benchmark, and a push higher in the pound has made matters worse. Next month’s BoE meeting could lean back to the dovish side as notable hawk Kristen Forbes has left. Adding to that, the most recent CPI and GDP numbers from the UK could temper the hawk’s views.
ITV (LON:ITV) shares are higher on the session after the company reported that it gained a larger slice of TV viewing time in the past six months. The TV show Love Island proved to very popular with viewers, and with a second series of the show in the pipeline, the TV channel will be more attractive for advertising slots. The firm increased its interim-dividend and this kept shareholders onside. With the rise of streaming TV, traditional networks like ITV need to keep producing extremely popular shows to attract viewers, and in turn advertising revenue.
US
It's business as usual in the US, where the Dow Jones, S&P 500 and Nasdaq 100 all printed record highs. On the other side of the fence, the volatility index (VIX), also known as the fear index, keeps falling.
Traders are clearly not put off by the fact that Donald Trump can’t bring in the health care forms that he wants. Political wrangling is still ongoing in Washington DC, and even though it looks bad for the Trump administration, stock market traders have shrugged it off. Perhaps traders are getting used to the idea that Mr Trump’s plans may take longer to implement, or not get approved at all.
Boeing (NYSE:BA) shares are up 8% after the company swung to profit in the second-quarter, and the earnings per share topped analysts too. Adding to that, the full-year EPS guidance was increased, and the rosy outlook was enough to cancel out the fact that the revenue for the quarter dropped by 8%.
FX
The GBP/USD has held above the $1.30 mark after the UK revealed respectable growth figures for the second-quarter. The preliminary reading shows the British economy grew by 0.3% compared with last quarter, and by 1.7% when compared with the same quarter last year. Both readings were in line with market expectations. The year-on-year figure did show a slowing of the growth rate, and when you factor in the cooling inflation, the bullish run the pound has enjoyed may slow down. The US dollar has been sliding in recent weeks, and traders will be taking their cues from the Fed meeting tonight at 7pm.
The EURUSD has dipped below the $1.17 mark as profit taking has set in. There has been no major economic announcements from the eurozone today, as traders had little to get excited about. Dealers are also booking their profits ahead of the Fed meeting later on. The single currency has rallied as the perception is the European Central Bank will discuss the possibility of reducing the bond buying scheme in the coming months. Also, the fed funds futures markets are pricing in a 45% chance of an interest rate hike in December.
Commodities
Gold is softer on the session as traders await the update from the Fed tonight. We are expecting interest rates to remain on hold, but we may hear more about the Fed’s plans to starting reducing the size of their balance sheet. The US central bank has talked about staring the reduction process this year, and tonight’s statement could provide more detail on it. Traders are not too fearful of an interest rate hike in the next few months from the Fed, but nonetheless they are getting out of their long positions before the meeting.
WTI and Brent Crude oil spiked on the back of the inventories report. The energy information agency (EIA) update showed that US oil stockpiles fell by 7.2 million barrels, while traders were only anticipating a drop of 2.7 million barrels. US oil production dipped slightly on the week too.
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