Europe
Markets in Europe have remained well supported today as they attempt to build on the gains of the last two days, with another record high for the FTSE 250 ahead of further details about a framework for US tax reform and tomorrow’s ECB rate meeting.
This afternoon’s comments from US Treasury Secretary Steve Mnuchin don’t appear to add too much detail to what we already know, namely that the US administration wants to cut corporate tax rates to 15%, as well as achieving growth rates of 3%.
He went on to say that further principles would be laid out later today, which suggests that we’ll get an aspiration list and that anything tangible will have to wait until much later in the year, meaning that we’re not really that much better off than we were 24 hours ago in terms of detail.
This probably helps explain why European stocks have remained in a holding pattern just below this week’s peaks, as we look ahead to tomorrow's ECB rate meeting, as well as next week's Fed meeting.
An improving sales outlook has seen specialist chemicals company Croda (LON:CRDA)shoot to the top of the FTSE 100, and above its previous record peaks from last year, as a weaker pound helped boost overall performance.
Standard Chartered (LON:STAN) has also outperformed after reporting a 94% increase in profits year on year. This was helped in no small part by a sharp drop in loan impairments, but overall the restructuring program appears to be on track.
Merlin Entertainments (LON:MERL) is also a top mover after having its price target upgraded by Morgan Stanley (NYSE:MS).
US
US markets edged higher on the open as Treasury Secretary Steve Mnuchin confirmed the intention to cut the headline tax rate to 15% from the current 35%, though he didn’t go into any detail as to how the move would be funded.
While markets look ahead to the level of detail that might be forthcoming investors continue to focus on the latest earnings announcements.
Aircraft maker Boeing (NYSE:BA reported some mixed numbers by announcing a 19% rise in profits, though revenue did come in slightly softer. Another concern was a decline in sales due to a slowdown in its defence business, however management were able to maintain a positive outlook, by raising guidance for the year.
Twitter's (NYSE:TWTR) share price got a lift after its latest numbers showed that user growth came in ahead of expectations, no doubt helped by the predilection of President Trump in making US policy by tweet. This Trump bump doesn’t appear to have translated into rising revenues as the latest numbers showed a fall of 8%, though losses were lower at $62m.
Having seen a massive rise in its share price in the wake of President Trump’s election in November last year, US Steel's share price has also slid sharply after reporting a quarterly loss and lowering its full year guidance. The 25% drop in the share price still leaves it above its pre-Trump levels but nonetheless it presents the US President with another problem of how to deal with low steel prices, despite the President ordering a probe into foreign steel imports. Could we see talk of tariffs here in the wake of this week’s Canadian softwood lumber announcement?
FX
The US dollar index managed to claw back some ground today after hitting five month lows yesterday in the wake of Mnuchin’s comments this afternoon, sending the greenback to its highest levels against the Japanese yen this month.
Commodity currencies appear to be bearing the brunt of the US dollar rebound with the Australian and New Zealand dollar, getting clobbered quite hard, with the kiwi hitting an eight month low against the pound.
Despite the resurgent US dollar, the pound continues to hold its own, no doubt helped by an opinion poll showing the Conservatives with a 23% lead over Labour, as we count down to the 8th June general election.
Commodities
Crude oil prices initially remained under pressure after the latest API inventories showed a surprise build overnight. Doubts about the ability of OPEC and non-OPEC members to coalesce around an agreement to extend the output freeze, when they meet in just over a month, was serving to act as a significant anchor on the price. This afternoons EIA inventories helped unwind some of that downward pressure with a bigger than expected draw of 3.64m barrels. Some of that effect may well be offset by a build in gasoline inventories, but this was expected.
Gold prices have continued to come under pressure, hitting one week lows as the more benign risk environment, along with expectations of a move away from dovish central bank rhetoric serves to undermine the attraction of the yellow metal.
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