Europe
European stocks are in the red heading into the close as investors are feeling the pinch of strong domestic currencies. Equity markets in Europe had a lacklustre start to the day as there wasn’t a whole lot to go on in terms of macro-economic news. The rate of decline in European stocks picked up as the pound and euro gained strength.
A lack of a dividend pushed shares in Standard Chartered (LON:STAN) lower today despite a good set of numbers. The bank saw rising revenue and profits, and the loan impairment charges slumped but it still wasn’t enough to coax buyers. The bank earns the majority of its money in emerging markets and it had to suspend dividend in 2015 in order to save cash. Seeing as the business is bouncing back, investors now feel it is time to reinstate the dividend. The share price has been pushing higher since February 2016, the turnaround is clearly going well, and we could see the positive share price trend continue.
Rio Tinto (LON:RIO) shares are in the red today even though the miner revealed a solid first-half update. Underlying earnings were up 152%, but undershot analysts’ estimates. The company is still focused on reducing its debt and return cash to shareholders in the form of healthy dividends and share buybacks. Investors were still unimpressed with the update, but given the rally in the share price over the past 19 months, today’s negative move could lure new buyers.
US
The Dow Jones traded north of 22,000 for the first time. The index was flirting with the level yesterday but this is the first time it exceeded the mark within official New York Stock Exchange (NYSE) hours. The bullish sentiment is still growing for the best of the best US stocks.
The gap between the Dow Jones and the S&P 500 and Nasdaq is widening, as the latter two have been hit by profit taking. Investors are still keen to pay a premium for the components for the Dow Jones.
Apple shares are up 5% after posting a strong set of third-quarter numbers last night. Profits jumped by 17%, and exceeded analysts’ estimates. Shipments to China were down 27%, as the company is losing ground to local competition. Apple shares (NASDAQ:AAPL) are the biggest gainer on the Dow Jones and that assisted the Dow in cracking the 22,000 mark.
FX
The continued weakness in the US dollar has helped the EUR/USD reach a new two-year high this morning. The decline in the Spanish jobless rate by 26,000 in July was encouraging to see, and it adds weight to the argument that the eurozone is improving. This is why there is speculation the European Central Bank will announce it is considering lowering the size of its bond buying scheme in the next few week or months.
The GBP/USD is higher on the day thanks to the soft greenback. The UK revealed a slowdown in growth in the construction sector in July. The reading came in at 51.9, while traders were expecting 54.5, and the June number was 54.8. Ordinarily the pound would have been punished for this, but luckily for sterling the drop in the dollar outshone it.
Commodities
Gold was pushed lower by the US ADP employment report, it showed that 178,000 jobs were added in July and the consensus was for 185,000 jobs. The June number was revised higher from 158,000 to 191,000, and that was the takeaway point from the report. This has set the tone for Friday’s non-farm payroll report. The perception the Federal Reserve will keep interest rates unchanged for the rest of the year is gathering momentum and that is why gold has rallied since early July, but a strong jobs report could put pressure on the metal. Gold managed to move back above $1270 as the US dollar lost more ground.
WTI and Brent Crude dropped after the energy information agency (EIA) announced that oil inventories only fell by 1.52 million barrels, while the consensus was for a drop of 2.5 million.
Yesterday the American petroleum institute (API) report yesterday showed that stockpiles rose by 1.8 million barrels. Given the API numbers, a smaller than expected drop in the EIA report was hardly surprising, and the energy market managed to rally again.
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