Europe
European markets had closed last week off the lows and were making modest gains today as expectations for a sooner than expected rate-hike from the FOMC were cut back after Friday’s unemployment report saw a more tempered US jobs growth in July.
The FTSE 100 got a lift from another strong construction PMI report alongside a rally in bank stocks after investors bought into HSBC (LONDON:HSBA)’s strong balance sheet and high dividend despite a 12% drop in profits.
The UK benchmark index moved back above 6,700 with a cautious air to it as healthcare stocks Glaxosmithkline (LONDON:GSK) and Astrazeneca (LONDON:AZN) and Utilities National Grid (LONDON:NG) and Centrica (LONDON:CNA), typically the more defensive plays led the pack
Banks saw some of the biggest declines in last week’s stock market rout. The banks have been weighed down by regulatory scrutiny and tend to be one of places investors press the sell button in a broad market sell-off.
A 4.9bn euro bailout for Banco Espirito Santo (LISBON:BES) has helped reduce the risk of banking contagion in Europe so bank stocks are getting some extra relief. The BES episode will not be soon forgotten though, particularly with new revelations of possible illegal activities surrounding the Espirito Santo group. It has left many wondering how far we’ve come since the European debt crisis and whether another example is just around the corner.
US
The move back lower in US yields has been matched by a dead cat bounce in US stocks following last week’s collapse as Berkshire Hathaway (NYSE:BRKa)reported a 10.5% increase in profits, Portugal’s BES got a bailout and rate-hike expectations were pared back.
The extent of last week’s declines, particularly for the Dow which dropped into negative territory for 2014 may mean buyers are little more tentative before buying the dip this time around.
Seasonal factors may start to play a role in how much of bounce we get after last week’s sell-off. Markets tend to get a bit illiquid during August as traders go on holiday so the result can be some drastic moves but the overall direction often ends up being sideways.
Michael Kors (NYSE:KORS) reported stellar sales and profits growth but dropped over 4% on the open after investor fears over reduced margins were confirmed by the increase in discounting throughout the quarter.
FX
The dollar was mostly flat against major trading partner currencies today on a lack of major economic data.
A bigger than expected jump in Australian retail sales gave AUD/USD a boost pushing the price back to 0.9330 which had been acting as a floor to the price since early June.
The pound saw some gains against the euro with EUR/GBP correcting slightly after reaching its highest level since July 1st as European producer inflation picked up in July.
Commodities
Gold continues to oscillate around $1,300 per oz right now sitting just below at $1,290. In a knock to its bullish case, the precious metal dropped alongside stocks last week as rate-hike expectations pushed investors towards the dollar rather than safe-havens.
Crude Oil broke lower on the GDP/FOMC last week despite the implied increase in demand from a growing US economy but saw some respite in the declines today as Brent moved back above $105 and WTI back above $99.
Copper reacted again off the $3.20 per lb level in expectation of another rise in China’s HSBC services PMI tonight despite a drop in the official non-manufacturing data over the weekend.
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