Europe
It’s been a fairly quiet start to the month for European equities, with the German DAX posting another multi month high, closer to its all-time high seen in April 2015, before slipping back with the rest of Europe’s markets.
The latest manufacturing PMI’s for the euro area showed an economy that looks to have had a decent quarter, with Spain, Italy, France and Germany all reporting decent numbers.
While the DAX has managed to outperform, the CAC40 has struggled as French election political risk continues to keep investors on the side-lines.
Amongst the best performers Micro Focus is leading the FTSE100 after the company disclosed the earnings of its newly acquired HPE Software, the business it looks set to acquire from Hewlett Packard.
Has the recent Kraft bid for consumer goods giant Unilever (LON:ULVR) caused a spill over effect through the rest of the sector? How else to explain the decision by Reckitt Benckiser to consider its options with respect to its food business, where it is reported that management are looking at spinning off the business to help fund its acquisition of baby food producer Mead Johnson.
The oil and gas sector is amongst the best performers with BP (LON:BP) near the top of the index after the company announced it was selling off one of its UK Forties pipeline to Ineos for $250m
The disposal of the UK government’s stake in Lloyds Banking Group (LON:LLOY) has continued today, with the tax payer stake falling 1 % to below 2%, and bringing with it the prospect that the taxpayer may well see a modest return on the initial £20.3bn bailout of the bank in 2008.
US
US markets opened slightly higher, with the Nasdaq making a new record high, after Friday’s weak finish as investors look ahead to this week’s FOMC minutes and US jobs report for March.
Last week US consumer confidence came in at a 17 year high, yet this morning’s US car sales data from the major manufacturers all point to a sharp slowdown in the US new cars market, with both Ford and GM missing expectations, while last week’s personal spending also pointed to a less than confident US consumer. This has sent automakers sharply lower with Ford, GM and Fiat Chrysler all slipping towards one month lows.
This divergence is a little troubling given how reliant the US economy is on the consumer.
On the data front the latest ISM manufacturing numbers for March came in at 57.2, slightly down from February’s 57.7, however both prices paid and the employment components showed strong gains.
In company news auto maker Tesla did report record deliveries for its cars; however these remain very much a niche product.
Drug Company Mylan is also in focus after extending the recall of its EpiPen allergy treatment to outside the US.
FX
A disappointing March manufacturing PMI number for the UK has seen the pound come under pressure today as activity in the sector came in at its lowest level this year and its lowest since November last year.
Input prices have continued to rise, but there is some evidence that we could see some plateauing as businesses adapt to the lower exchange rate.
Also on the slide the Australian dollar has come under pressure after retail sales data for February showed a sharp drop from 0.4% to -0.1%.
Commodities
Another rise in US rig counts at the end of last week to levels last seen in October 2015 has once again acted as a reminder that US shale producers continue to add supply at a rate quicker than OPEC producers can cut it.
While OPEC secretary general Barkindo can talk about the prospects of falling stock piles bringing the market back into balance, the fact remains that it is likely to happen at a much slower pace than originally envisaged, unless OPEC and non OPEC members decide to extend the current production curbs beyond the original June deadline.
Gold has stayed remarkably resilient despite better than expected US economic data.
"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. "