Europe
Stocks are on the rise today as a sense of optimism has returned to the equity markets. The fear surrounding the Saudi attack has disappeared, plus the Federal Reserve cut interest rates last night. The Fed have lowered rates twice in three months, which adds to the global move by central banks - who have largely loosened monetary policy this year. Today, the Bank of England (BoE) maintained their monetary policy, meeting trader’s expectations’. Mark Carney, the BoE chief, reiterated the view that if there is a smooth Brexit, the BoE are likely to hike rates, which paints the UK economy in a positive light.
The warm weather was cited as the reason for the poor start to autumn at Next (LON:NXT), but then again the fashion house claimed that an unusually warm Easter helped them out earlier in the year. In the six month period, full-price sales increased by 4.3%, while total sales – which includes discounted items, improved by 3.8%. Some retailers complained the political uncertainty surrounding Brexit has caused some consumers to refrain from spending, but Next has not seen any proof of such habits. The company is clearly optimistic about the future as it maintained its outlook, plus the interim dividend was raised too – which is rare in the retail sector these days. The stock is down 5%.
Kier Group (LON:KIE) has been undergoing a restructuring programme, which led them to reveal a one-off expense of £341 million that relates to the sale of a number of businesses. The group is selling-off non-core assets in a bid to get back to basics. It isn’t ideal the group took such a hit, but it is a step in the right direction. Kier swung to a loss to £245 million on account of the charge. The group said that debt slipped by over 10%, and it is considering ways to release cash from its property business, so at least the turnaround scheme is showing results.
US
The major US indices are higher in the wake of Fed’s update yesterday, even though the US central bank wasn’t as dovish as traders were hoping. The Fed cut rates by 25 basis points, meeting forecasts, but commentary from Jerome Powell, the Fed chief, didn’t suggest that further cuts are due in the near-term. Rates are lower nonetheless, and the US posted solid housing data today. Existing home sales in August were 5.49 million, which topped the 5.37 million forecast, as well as being an improvement on last month.
Darden Restaurants (NYSE:DRI) shares’ are in the red today after the group revealed mixed quarterly figures. In the first-three months, blended like-for-like sales increased by 0.9%, which undershot the 1.3% forecast. Sales were $2.13 billion, which was broadly in line with forecasts, while EPS were $1.38, which narrowly topped forecasts. It was a middle-of-the road, and the stock is in the red today, but keep in mind, the share price hit a record-high last week, so some of the good news was factored into the price.
Microsoft (NASDAQ:MSFT) shares hit a record-high on the back of yesterday’s announcement that it will increase its quarterly dividend by 5 cents to 51 cents, in addition to another $40 billion share buyback scheme. The generous returns to shareholders underlines the strong performance of the group.
FX
GBP/USD has been given a lift by the softer US dollar. The BoE update was encouraging as it said that if Brexit goes smoothly, interest rates are likely to rise, but major uncertainty surrounds the situation. UK retail sales in August fell by 0.2%, but the July report was revised higher from 0.2% to 0.4% so the average reading was alright.
EUR/USD has also benefitted from the sip in the greenback. It was been an uneventful day in the eurozone in terms of economic updates, so the euro has the softer greenback to thank for the move higher.
Commodities
Gold continues to dance around the $1,500 mark. The update from the Fed last night didn’t pave the way for further rate cuts, which ordinarily would hurt gold, but the metal hasn’t moved much, which suggests that demand is still firm. Gold has been in a strong upward trend for months, and while it holds above the $1,500 mark, the bullish trend should continue.
Oil is largely unchanged today ,but it enjoyed a boost this morning when it was reported that Saudi Arabia were importing crude oil, gasoline as well as other energy products in an attempt to maintain their business contracts. The nation clearly wants to make good on its export commitments so it is buying energy to resell as they don’t lose market share. No doubt other energy producers view Saudi’s misfortune as their opportunity.
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