European markets have started the day in a fairly positive fashion as we come to the end of what has been a turbulent and historic week. Having traded as low as 5,938 in the wake of last week’s surprising Brexit vote the FTSE100 looks on course to post its best week since 2011 as the weaker pound helped pull the index back above its pre Brexit vote highs by the middle of the week. While it is no doubt true that on a currency basis the FTSE100 is still down in euro and US dollar terms, the fact that it is one of the highest yielding blue chip benchmarks at over 4% could well be providing a pull factor in an era of ever decreasing interest rates.
While the FTSE100 is managing to hold its own the FTSE 250 is finding it a little more difficult slipping back 1% over concerns about the outlook for the UK economy over the rest of the year.
On the upside it’s been a good week for gold and silver miners Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) helped in no small part by expectations of looser monetary policy across the board in the coming months, as both gold and silver prices push higher.
Overnight in Asia the latest Japanese and Chinese economic data pointed to a continued softness in both countries’ economies which would appear to suggest that both central banks could implement further easing measures in the coming months.
The prospect of further easing in Asia is likely to constrain the ability of the US Federal Reserve to look at raising rates in the short to medium term, and this was reflected in the US 10 year yield which briefly hit a new record low of 1.3784% early this morning
Despite yesterday’s comments by the Bank of England governor that he would do his utmost to cushion any potential downturn the worst performers are the usual suspects of the banks and house builders, with Royal Bank of Scotland (LON:RBS), and Barratt Developments (LON:BDEV) on the back foot.
Mining stocks are also slightly weaker led by BHP Billiton (LON:BLT) and Antofagasta (LON:ANTO) on slightly weaker commodity prices and the weaker China data.
European and UK manufacturing PMIs for June came in slightly better than expected with the UK number jumping unexpectedly from 50.1 to 52.1, helping stabilise the pound after yesterday’s sharp fall, though a good part of the June activity probably came before last week’s vote, which means there may be a knock on effect into July.
US markets look set to open slightly lower today ahead of the long weekend 4th July celebrations as investors contemplate a week that started on the back foot and now looks like finishing on the front foot.
This week’s US data has by and large been fairly positive, with yesterday’s Chicago PMI for June seeing a big jump in the headline number, however the employment component was a little concerning given that it declined, which suggests that today’s ISM manufacturing number could deliver a similar outcome. The headline number is expected to come in unchanged at 51.3, though it could come in a little higher reflecting the slightly better numbers seen in Europe today.
Stocks in focus include Tesla Motors (NASDAQ:TSLA) after it was announced that US safety regulators would be investigating 25,000 Tesla S cars after its autopilot feature was claimed to have caused a fatality.
The decision by Hersheys (NYSE:HSY) to reject a bid by Mondelez (NASDAQ:MDLZ) could well see significant activity in both company’s share price when markets open later.
The Dow Jones is expected to open 50 points lower at 17,880
The S&P500 is expected to open 5 points lower at 2,093
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