Europe
In contrast to US markets, traders in Europe continue to be much more cautious with respect to driving markets higher with disappointing economic data acting as an anchor in Europe. German monthly retail sales declined 0.6% in May despite rising consumer confidence, while the latest June CPI numbers showed a rise in core prices from 0.7% to 0.8%, making the prospect of any further action from the ECB in the next few months, much less likely.
Once again it’s been the FTSE 100 that has underperformed with health care and airline stocks acting as the main drag today.
Amongst the fallers today Easyjet (LONDON:EZJ) shares have taken a tumble after Bank of America downgraded its outlook for the stock and slashed its price target. The bank cited rising fuel costs and recent profit warnings from sector peers for its more pessimistic outlook on the sector. EasyJet shares have now slid more than 20% from their April peaks, but these falls do need to be set in the context of a rise since 2012 of over 200%. Sector peer International Consolidated Airlines (LONDON:ICAG) is also lower.
Also lower Sports Direct (LONDON:SPD) shares have continued to feel the fallout from the row over the bonus scheme for founder and Chairman Mike Ashley.
On the plus side drinks giant Diageo (LONDON:DGE) is higher on reports that it is looking to tie up a merger with sector peer Sabmiller (LONDON:SAB), while British Sky Broadcasting Group (LONDON:BSY) is also up on speculation of a share buyback.
US
US markets opened slightly lower today after Friday’s strong finish, trading cautiously as we end the month and quarter, with the S&P 500 set to post its sixth successive positive quarter in a row, its best run since the mid 1990’s when the index posted fourteen positive quarters in succession, from 1995.
Market participants don’t seem too concerned with weekend comments from the BIS that current market exuberance is not being match by underlying economic fundamentals; with the Nasdaq 100 hitting thirteen year highs in the wake of this afternoon’s housing data.
Today’s economic data has managed to underpin the markets in thin trade with the Chicago PMI survey for June slightly missing expectations, coming in at 62.6, below the forecasted 63.
Pending home sales in May rose 6.1% from the month of April, which is the biggest gain since April 2010, but also probably needs to be set in the context of a bounce back after subdued demand in Q1 due to the cold weather.
On the stock front Yahoo! Inc (NASDAQ:YHOO) shares are higher after being upgraded the stock to overweight, indicating that the upcoming Alibaba IPO would help underpin the stock price.
FX
A weaker US Dollar and a stronger yen has seen the greenback hit its lowest levels for over a month and in the process bring it close to its lowest levels this year, as US markets continue to buy into the narrative of low rates for longer. A break below the 200 day MA has also added a technical element to the story closing below here for the first time since late 2012.
The Canadian dollar has slipped back after the latest monthly GDP data came in below expectations.
The pound continues to do well despite a slowdown in mortgage approvals for May, while business confidence jumped to a 22 year high, as confidence about the economic outlook continues to improve. The pound hit its highest levels against the US dollar since 2008, as it traded above $1.7070.
Commodities
Brent Oil prices have started to slip back as markets get used to the noise emanating from events in Iraq. The lack of any substantive hit to production has assuaged some early concerns that the increased turmoil in that region might hit output.
Concerns still remain that the situation might still escalate further but for now prices are starting to slip back towards the $112 highs that had capped the price action for most of this year.
US oil prices have also drifted down, but have struggled to break below the lows of last week.
Earlier this year wheat prices jumped sharply over concerns that events in Crimea and the Ukraine could adversely affect exports from that region to the rest of the world. In the space of two months prices rose by 20%, peaking in early May.
Today prices are back down where they more or less started the year, after good crops from India and Europe helped pull prices back down again offsetting a poor winter yield from the US.
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