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Equities Stabilise As Oil Rebounds

Published 29/03/2017, 06:41
Updated 03/08/2021, 16:15

Europe

European stocks have struggled for direction today after yesterday’s declines, and while the DAX has managed to make some decent progress, stocks elsewhere in Europe have lagged behind. While sentiment over the past few days has been on the negative side as a result of US President Trump’s local difficulties, the absence of any significant positive drivers is keeping investors adopt a cautious tone as we head into the end of the month and the quarter.

While yesterday’s late rebound in US markets was predicated that US lawmakers would be more determined to deliver something tangible on tax reform in order to offset the healthcare failures, anything quick and tangible is likely to remain a remote prospect.

Wolseley (LON:WOS) is the best performer after announcing that it would be withdrawing from its struggling Nordic business to focus more on its US operation, which delivers over 80% of the groups profits. The company also announced it would be changing its name to Ferguson, though it would keep the Wolseley brand for its UK markets.

The basic resource sector has also had a little bit of a rebound after yesterday’s losses after commodity prices stabilised, with Rio Tinto (LON:RIO) and Glencore (LON:GLEN) rebounding.

US

US markets opened in a fairly cautious fashion after the latest US trade balance for February narrowed slightly to -$64.8bn from -$68.8bn in January, while consumer confidence in March shot up to 125.6, the highest level since December 2000.

The main focus today is on speeches by Fed chief Janet Yellen as well as Dallas Fed chief Robert Kaplan later today.

FX

The pound has had a fairly neutral day ahead of tomorrow’s expected announcement of the triggering of Article 50 of the Lisbon Treaty, which will kick off the process by which the UK announces its intention to leave the EU.

The US dollar has remained under pressure along with US treasury yields as doubts about future US fiscal policy conspire to keep traders cautious.

For all the talk from Fed policymakers about the prospects of another two or three rate rises this year, the whole argument is moot if the new US administration and wider Republican party gets bogged down in a morass of bickering and name calling, as the fiscal ramp fizzles out, and any expected economic boost fails to materialise .

The Japanese yen and to a lesser extent the Swiss franc remains amongst the better performers on the back of lower US treasury yields and some limited risk aversion.

Commodities

Oil prices have picked up after failing to move through the lows of last week, and on news that a pipeline in Libya had been closed, while continued speculation about an extension to the output freeze is helping limit the downside.

Gold prices, despite failing to overcome the 200 day MA yesterday, hasn’t dipped that much which suggests that investors remain cautious about the prospects of success on tax reform and additional infrastructure spend.

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