Europe
European equity markets are largely lower on the day today as the morning bounce back from yesterday’s decline ran out of steam. Investors aren’t in a major panic about the North Korean situation but it is certainly on their minds. The fact the move higher today in the FTSE 100, CAC 40 and IBEX 35 couldn’t be sustained for the session indicates it was mostly short covering that propped up the market. The markets despise uncertainty, and while the Pyongyang problem is bubbling away in the background, we may see more of the same.
Shares in Redrow (LON:RDW) hit a fresh record high today after the company registered a 20% jump in revenue and a 26% rise in profits. The full-year dividend was upped by 70%. The firm’s outlook is bullish and we are seeing that being reflected in the share price, which is up 3.6% today.
US
The Dow Jones, S&P 500 and NASDAQ 100 are all down today as the US markets re-open after the long weekend. US stock markets were shut yesterday as the country celebrated Labor day, and now they are playing catch up.
The drop in stocks in Europe due to the nervousness surrounding North Korea is seeping into the US today. US equity markets are been in better shape than their European counterparts lately, and a bit of profit taking is not out of the ordinary in situations like these.
Federal Reserve member, Lael Brainard announced the US central bank should look to start unwinding their $4.5 trillion balance sheet. Ms Brainard also stated the Fed should wait until inflation ticks up before hiking interest rates again.
No indication of an interest rate hike in the next few months is a double edged sword. On one hand, you would think I might encourage buying of stocks, but on the other hand, a lack of hawkish commentary suggests the economy is not overly strong.
FX
The EUR/USD was largely unchanged for most of the day, but a broad decline in the US dollar helped the single currency. The eurozone services sector in August grew at a slower rate than expected, the reading was 54.7, and traders were expecting it to remains ready at 54.9. Of the major eurozone countries, Germany was the only one to expand at a faster rate than the previous month – which sums up the region.
The GBP/USD has gained ground today, even though the latest figures for the UK services sector showed that it grew slower than expected. The services PMI report was 53.2, the consensus was for 53.5, and the previous report was 53.8. Sterling was already moving higher before the Fed’s Lael Brainard stated inflation needs to pick before interest rates can be hiked, and those comments push the pound higher.
Commodities
Gold is a bit stronger today as the weakness in the greenback pushed it up. The safe-haven asset its highest level in nearly one year yesterday, so the momentum is with the buyers. Even though tensions in relation to North Korea have waned today, the situation isn’t resolved and another flare up could jolt the metal higher.
Lael Brainard, of the Federal Reserve stated interest rates shouldn’t be hiked until inflation is on track. The statement from the US central banker assisted the metal.
WTI and Brent Crude have jumped today as some US refineries are back in operation, and in turn demand for oil is ticking up. Traders were quick to sell WTI in the immediate aftermath of tropical storm Harvey, and now we are seeing a reverse of that move. Dealers are also concerned about the possibility of war with North Korea, as countries like South Korea, Japan and China account for majority of East Asia’s oil production.
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