UK and Europe
European shares traded with a positive bias on Wednesday but enthusiasm for the rally that began mid-February appears to be running a little thin on the ground. Major stock markets have set into a holding pattern before Thursday’s European Central Bank meeting.
Progress in European markets has been at a standstill since it emerged that the European Central Bank was beginning to second-guess its own hints at further easing.
While there wasn’t a wholehearted jump into risky assets like stocks, haven assets lost value with the price of gold losing over 1% on the day.
Markets were kept buoyant with the price of oil bouncing back from yesterday’s sell-off. Brent crude moved back above $40 per barrel helped by a slowdown in the build of US inventories.
Shares of Inditex (MC:ITX), the owner of the Zara clothing outlets rose on Wednesday. Inditex same store sales continue to expand at an impressive clip of 8.5% y/y and its aggressive store expansion plan of 400 extra outlets a years is set to continue supporting growth. The expansion online was not such an issue for gross margins in the 4th quarter and so far other fashion houses have been unable to catch up with the nimbleness of Zara’s supply chain.
Housebuilders and utilities were top risers on the FTSE 100. Utilities companies SSE (LON:SSE) and Centrica (LON:CNA) are amongst the top risers after former received a broker upgrade while the sector felt relief over French competitor EON’s kitchen sink approach to writing down German power plant assets.
Housebuilders Taylor Wimpey (LON:TW) and Berkeley Group (LON:BKGH) were top risers ahead of earnings in the sector next week.
Basic resource shares were the worst performers on the UK’s benchmark with shares of Anglo American (LON:AAL) shedding as much as 5% as investors continue to digest the weak economic data from China.
Prudential (LON:PRU) shares jumped after the insurer announced a special dividend backed up by a 22% rise in pre-tax operating profits in 2015. Profits were most impressive in the life-insurance unit while its M&G fund management division saw outflows as retail investors pulled funds during volatile markets. The diversification of Prudential’s businesses with its Asian-focus helped it weather the storm of claims over the UK floods in December.
US
US stocks rose in early trading on Wednesday as crude oil prices jumped, but gains were limited by weak wholesale data that saw inventories rise whilst sales declined, taking the ratio between the two to the worst since the financial crisis.
FX
The US dollar was mixed on Wednesday with commodity currencies outperforming thanks to a rally in oil and copper prices while the euro fell ahead of the ECB meeting on Thursday.
The Canadian dollar rose after the Bank of Canada chose to leave interest rates on hold at 0.5% at its latest policy meeting. The Canadian central bank was mostly positive on the outlook for the Canadian economy and appear comfortable with the recent bout of strength in the Canadian dollar which has risen in line with oil prices.
Commodities
The price of oil added to daily gains after weekly US oil inventories rose by 3.88M, higher than estimates but well below the shockingly large build seen last week. Inventories at Cushing Oklahoma rose to a new record.
Gold prices slumped as much as 1% amidst a general flight out of safety which was perhaps exaggerated by a drop in the euro ahead of the ECB meeting. The euro has acted as a haven in the recent market sell-off on repatriation flows, helped by its inverse relationship with the German Dax.
DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.