Europe
We’ve seen a welcome respite for European stock markets today after several days of declines, despite continued moves higher in bond yields.
It would appear that after several days of drifting lower we’ve seen some signs of tentative bargain hunting, given that stocks have been trading near multi week lows, with some well received trading updates also helping boost sentiment.
Among the best gainers today we’ve seen supermarkets enjoy some good gains after J Sainsbury (OTC:JSAIY) PLC (LONDON:SBRY) announced numbers which on the face of it were a little disappointing, coming in as they did with a decline of 2.1% in Q1 like-for-like sales. This decline was the sixth successive quarterly drop but it appears that investors were encouraged by the fact that we didn’t see a 2.5% decline which had been one of the worst case scenarios. There were also some other bright spots including improving on-line sales growth, and an improvement in the volume of products sold.
Today’s update from Sainsbury also helped boost sector peers Morrison and Tesco (LONDON:TSCO).
In the banking sector Standard Chartered (LONDON:STAN) Bank stood out on speculation that the Chancellor might announce some tweaks to the bank levy to cover UK assets only, when he gets up to speak at Mansion House later this evening. The rest of the sector has struggled after ratings agency Standard and Poors downgraded the sector on the basis that the banks would receive a significantly reduced amount of state support in the event of a crisis, weighing down on the share price of Lloyds (LONDON:LLOY) and RBS (LONDON:RBS).
Also sliding back is oilfield services provider Weir Group (LONDON:WEIR) after the company reported a sharp drop off in oil and gas orders, particularly in its US operation.
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US
With little in the way of economic data to look forward to US markets took their cues from Europe’s positive session today and opened higher, despite a continued rise in US bond yields. Having dropped quite a way in the last week or so and trading at one month lows, we’ve seen some buying interest come back into the market, ahead of tomorrow’s retail sales numbers for May.
On the company front US retailer Target Corporation (NYSE:TGT) confirmed yesterday’s hastily withdrawn press release which prematurely announced that the company would be raising its quarterly dividend by 7.7%, and boosting its buy back to $10bn. As an exercise in how not to manage a press release it surely can’t be bettered.
Apple’s newly launched Apple (NASDAQ:AAPL) Music subscription service is also facing antitrust scrutiny in the states of New York and Connecticut, hardly an auspicious start. The broader worry here is that given how European regulators deal with US companies the service could fall foul of European authorities given it comes bundled in with the iOS operating system, in a similar way that IE came bundled in with Microsoft’s Windows operating system.
FX
It’s been a busy day on currency markets with the Japanese yen posting one of its biggest one day gains on comments from Bank of Japan governor Kuroda, who suggested that the weakness seen in the yen recently had gone far enough. This prompted a sharp fall in the US dollar against the yen despite a sharp rise in US bond yields as traders were caught on the wrong side, though we did see a bit of a pullback after Japanese economy minister Amari said that markets had misunderstood Kuroda’s comments.
In little under two months we’ve seen German bund yields rally from lows of 0.05% in April to 1.05% today, a process that has helped put a floor under the euro, as well as catching an awful lot of investors the wrong side. This relationship between German and US yields is likely set to continue to dominate the next moves in the euro against the greenback which has seen a decent trading range today as it revisited one week highs just below 1.1400. The upside has been capped though by background concerns surrounding events with respect to Greece.
The pound has hit its highest levels this month ahead of a keynote speech by Bank of England governor Mark Carney later today at Mansion House. The market appears to be nervous that the governor might do what he did last year and suggest that the market is underestimating the prospect of a rate hike this year, though such an assessment isn’t really supported by recent economic data, which has been a little weak.
Commodities
Oil prices have been supported by increasing concerns about falling US inventory data, the latest weekly data showing a decline of 6.8m barrels, pushing prices higher for the second day in succession. Prices are now near to their highest levels this month, with WTI prices retesting the highs seen last month as they look to move towards levels last seen in December last year.
Despite the gains of the last couple of days the fact remains that stockpiles still remain quite healthy which would appear to suggest that further upside could well be fairly hard won, or the result of US Dollar weakness than anything more tangible.
Gold prices also appear to be showing some signs of stabilisation, despite rising yields, pulling up from two month lows at the end of last week. A slightly weaker US dollar is helping support commodity prices more broadly.
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