Europe
European equity markets finished the day on a positive note, as traders shrug-off talk of an American trade war. Equity benchmarks spent a large portion of the day in the red, but the fear appears to have melted away. Traders will be waiting for President Trump to make the next move. Investors want to see if he will follow through with his threats.
Rolls Royce (LON:RR) shares have jumped today after the company revealed a solid set of numbers. Revenue ticked up by 9% and profit came in at £4.9 billion, which was a major improvement on the £4.6 billion loss that was racked up last year. The swing to profit highlights how well the restructuring plan is going. There is still more work to be done in relation to reorganising, as the company plans to reshape the business into three units, down from five at the moment. Rolls Royce failed to comment on whether there will be a reduction in the head count. The stock hit its highest level since November today, and if the bullish move continues it could target 1,000p.
Numis Securities cut their share price target for Biffa (LON:BIFF) from 315p to 285p, and this sent the stock down 11% to 220%. Today Biffa issued a positive trading update, but the lowering of the price target over shadowed it. The firm stated it expects the company’s second-half performance to meet forecasts, and organic and inorganic growth levels are higher. The stock dropped to its lowest level in nine months, and if the bearish trend continues it could target 200p.
US
US stocks are off the lows of the day, but are still in the red. The concern that US traders had for a trade war is fading, but that is not to say it has gone away.
The stepping down of Gary Cohn as chief economic advisor to President Trump left traders thinking the US could be heading toward an economic conflict. The announcement from Steven Mnuchin, the treasury secretary, that the US ‘will definitely’ impose steel and aluminium tariffs just reinforced those fears held by investors.
The ADP employment report came in at 235,000, while economists were expecting 195,000. The January figure was revised higher from 234,000 to 244,000. This bodes well for the US non-farm payrolls report on Friday. The average earnings component will be closely watched, but for the time being the chatter about a trade war will take precedence.
FX
The US dollar index is largely unchanged as traders remain cautious about the prospect of a trade war. All things considered, the greenback is holding up pretty well, especially when you take into account the reaction from US stock markets.
EUR/USD has experienced a relatively small trading range today and the GDP report from the region underlined how it is slowing down. In the fourth-quarter of last year, the currency bloc grew by 2.7%, which was down from 2.8%.
GBP/USD also had a quiet day, in line with the rest of the foreign exchange market. UK average house prices continued to cool, but still managed to top estimates. According to Halifax, the UK average UK house price grew by 1.8%, while economists were expecting a reading of 1.6%, but the January report showed an increase of 2.3%. The pound is going to be exposed to political volatility, on account of the Brexit talks and US tariffs chatter.
Commodities
Gold is in the red today, but the metal managed to take out yesterday’s high before turning lower. The metal has been pushing higher for nearly a week, and given how much ground it covered yesterday, it is hardly surprising we have seen some profit-taking. The metal is likely to be in demand while the talk of a trade war is doing the rounds.
WTI and Brent Crude oil experienced a jump in volatility after the latest energy information administration report. US oil stockpiles grew by 2.4 million barrels while the consensus was for an increase of 3 million barrels. Gasoline stockpiles dropped by 788,000 barrels, but traders were expecting a decline of 1.65 million barrels. The US reached another record for production output, and is hanging over the oil market.
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