Europe
Shares in Capita (LON:CPI) crashed today after the company issued a profit warning, suspended its dividend and revealed plans to raise £700 million via a rights issue. The outsourcing company stated that cutting costs and disposing of non-core assets won’t be enough to make up the difference to pay down debt. The company has already been improving its debt to equity ratio, and if it can raise the funds required and focus on few core businesses it stands a chance of surviving this turbulent time.
British homebuilders are feeling the pinch today after the government could rescind planning permission on land that isn’t being developed. The move is seen as a way for Westminster to encourage house builders to speed up their rate of building houses in order to ramp up the supply of new houses. Some construction companies have been criticised for sitting on land banks and developing the sites in their own time, all the while there is a housing shortage going on in some parts of the country. Shares in Persimmon (LON:PSN), Taylor Wimpey (LON:TW) and Barratt Developments (LON:BDEV) are lower on the day.
UK-listed healthcare stocks are in the red today, and this comes one day after Berkshire Hathaway (NYSE:BRKa), Amazon (NASDAQ:AMZN) and JPMorgan (NYSE:JPM) revealed plans yesterday to strike up joint venture, and enter the health care sector. Amazon alone are known for disrupting sectors they enter so stocks likes AstraZeneca (LON:AZN) and Shire (LON:SHP) are in the red today.
US
US equity markets have bounced back from the relatively big sell-off they suffered last night. The Dow Jones, S&P 500 and Nasdaq 100 are all higher today and traders are looking ahead to Janet Yellen’s last update as Federal Reserve chair later today.
The US central bank will announce its interest rate decision at 7pm (UK time) and the statement will be revealed at the same time. No change is expected on the interest rate, and it is unlikely the outlook will be altered as Ms Yellen won’t want to rock the boat while leaving the Fed.
Traders are expecting are increase in inflation and growth forecasts from the Fed in the coming months as the weak US dollar will probably equate to higher inflation, and Trump’s tax reforms would lead to higher wages and growth.
FX
EUR/USD is taking advantage of the slump in the US dollar and is grinding higher even though eurozone CPI slipped to 1.3%, from 1.4%. The rate of inflation in the currency bloc has fallen to a six month low, but traders are more concerned about the drop in the greenback. The slide in the cost of living in the eurozone would keep the European Central Bank’s monetary policy loose for some time to come, which may take some of the heat out of the euro.
GBP/USD is still being helped along by a weak US dollar. There were no major economic announcements from the UK, but traders still bought the pound as the greenback remains in its downward trend. Sterling has been gaining ground versus the US dollar since March last year, and the trend is showing no signs of changing.
Commodities
Gold is former on the session due to the depreciation in the US dollar. The soft US dollar make the metal more attractive, and we are seeing a continuation of the upward trend that began in mid-December. Gold may experience some increased volatility when the Fed release their interest rare decision and statement at 7pm (UK time). Should we see an increase to the inflation and or growth target it could trigger selling in gold.
WTI and Brent Crude are weaker after the energy information administration (EIA) stated that US oil inventories jumped to 6.77 million barrels, from a decline of 1.07 million barrels in the previous week – the consensus was for an increase of 538,000 barrels.
To counteract the enormous build in oil stockpiles was the decline of gasoline inventories of 1.98 million barrels while the consensus was for an increase of 1.88 million barrels.
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.