Europe
European equity markets were given a nice lift after the European Central Bank (ECB) said dealers misinterpreted Mario Draghi’s comments yesterday. The ECB made sure the market got the message that they are keeping their policy as is for the time being. Mr Draghi was upbeat in his assessment of the region and his remarks about reflation gave traders the impression he was considering tightening his monetary policy. Today, the ECB set the record straight that they are content with their policy, and this encouraged buying of equities, but the enthusiasm was short lived, and the benchmarks turned negative.
Dixons Carphone (LON:DC) revealed a 10% rise in profits, the first time profits exceeded the £500 million mark. Global sales increased by 3%, while revenue from its largest region, the UK and Ireland, only rose by 2%. Despite the good numbers, the share price is lower on the day.
Bunzl (LON:BNZL) reported a 7% rise in first-half revenue, and the business is continuing on the acquisition trail as it bought a Spanish firm and two Canadian companies. The stock is up over 2% on the day.
Tullow Oil (LON:TLW) shares are slightly down on the session after the company announced a $600 million impairment charge due to the collapse in the oil price. The firm has reduced its spending forecast for next year by $100 million in a bid to reduce its debt levels. This isn’t the first time Tullow Oil had to tighten its belt, and if the oil market remains turbulent, we could be seeing more of it.
US
The Dow Jones, S&P 500 and the Nasdaq 100 are all up approximately 0.5% on the day after we had reassuring comments from US central bankers last night. The Federal Reserve Chair, Janet Yellen said we will not see a repeat of the 2008 credit crisis in our lifetime. Ms Yellen is hoping to keep the Fed on a path of rising interest rates, but they will be timely and predictable. Patrick Harker anticipates there will be one more rate hike in 2017.
Senate Majority Leader Mitch McConnell has postponed the vote on the health care bill until after the 4th July recess. The President pledged to repeal Obamacare while he was on the campaign trail, and this disruption has shown traders that implementing his policies may not be as easy as Mr Trump thought. The Republican Party remained divided over the bill, and investors wonder what else are they divided over? The US President has promised to overhaul banking regulation and pursue new infrastructure plans, and a lot of the buying done at the start of the year was in anticipation of these changes. The political division is playing on dealers' minds.
FX
GBP/USD surged after the Bank of England Governor (BoE), Mark Carney, stated that some of the stimulus may need to be removed. There is a big difference from what Mr Carney said last week, when he gave the impression the BoE will be keeping their monetary policy loose as Brexit could turn out to be a bigger challenge than originally thought. Today’s hawkish comments caught traders off guard and it sent sterling flying. The weakness in the pound has played a role in the UK’s rising inflation and some strength could assist in keep CPI in check.
The EUR/USD saw choppy trading today after the European Central Bank (ECB) revealed that the financial markets misinterpreted Mario Draghi’s comments yesterday. The single currency powered ahead yesterday when the ECB President was optimistic in his outlook for the region. Traders took the comments as a sign that the ECB would consider reining in its loose monetary policy, but today the central bank clarified the eurozone has some way to go before it will alter its policy.
Commodities
Gold is lower despite the drop in the US dollar. The metal has struggled to move beyond the 50-day moving average at $1255 in the past few sessions, and it is almost as if it is indecisive. Since late December 2016, gold has been in an upward trend, and it suffered due to the hawkish update from the Federal Reserve this month, but it can’t seem to turnaround.
WTI and Brent crude oil rallied to levels not seen in over a week, even though oil inventories came in well above market expectations. The Energy Information Agency (EIA) report showed that stockpiles increased by 118,000, while the consensus was for a decline of 2.5 million barrels. The market jumped higher after the data was released, but the concerns about over-supply haven’t gone away.
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