Europe
Stock markets in Europe are heading for a strong finish, and the FTSE 100 could close the session at a record high. The London market has been helped along by the supermarkets as Marks and Spencer (LON:MKS), Sainsbury's (LON:SBRY) and Morrisons are in demand on the back of the report from Nielsen which stated all of the ‘big four’ had a positive Christmas period.
Morrisons (LON:MRW) are continuing their turnaround as they had an impressive Christmas period. For the ten weeks up until early January the company saw like-for-like (LFL) sales excluding increase by 2.8%, and transactions increased by 2.3%, which underlines the increase in demand. Morrisions have a joint venture with Ocado (LON:OCDO), which is proving to be fruitful as online sales jumped by 10%. Morrisons was struggling a few years ago, but with the company diversification into wholesale and the success of the online operation, the business is looking healthier. The share price is up 2.7% today.
Carillion (LON:CLLN) shares are under pressure as traders wait the all-important recuse meeting tomorrow. The construction firm will be seeking debt relief from creditors to give it breathing space, and it needs to sell-off assets as it is in dire need of cash. The company has a large order book of business lined up, but first it must bridge the gap of the cash flow problem, which won’t be easy.
Persimmon (LON:PSN) issued a robust trading update and the homebuilder stated that new home completions and average selling price increased by 6% and 3% respectively. The company stated that forward sales were up 10% on last year too. The stock is down 1.3% as a story about a major pay packet for the CEO prompted profit taking.
US
The positive move continues in the US as the Dow Jones, S&P 500 and the Nasdaq 100 have reached record highs yet again. It’s the same old story on Wall Street whereby traders remain optimistic about the US economy on the back of the pro-business tax reforms that were approved last month. The momentum is clearly behind the bulls and it appears that more buyers are jumping on the bandwagon.
The Job Openings and Labour Turnover Summary (JOLTS) in November fell to 5.87 million, while the October figure was revised lower from 5.99 million to 5.92 million. The slight softening of the US labour market ties in with the latest US non-farm payrolls report, where the headline figure was considerably below market estimates. The US jobs market is still strong, but some soft patches will occur.
FX
EUR/USD has been hit by the move higher in the US dollar, despite the healthy economic indicators from the eurozone. The unemployment rate in the currency bloc dropped to 8.7% from 8.8% - meeting expectations. The jobless rate in the eurozone has dropped to its lowest in nine years which highlights how effective the loose monetary policy of the European Central Bank (ECB) has been over the past few years. The single currency has been pushing higher versus the US dollar since November, and wider trend over the past year has been positive too, so we could see the positive trend continue.
GBP/USD has also come under pressure from the rally in the US dollar. There were no major economic announcements from the UK today, so the pound has been pushed around by the greenback. The slightly worse than expected JOLTS from the US saw some buying of the pound, but the day has been dominated by a broadly positive move in the US dollar.
Commodities
Gold is in the red as the jump in the US dollar has weakened the metal. It doesn’t help that global stock markets are strong as traders are in a risk-on strategy mode, dealers has less of a desire for the metal. Considering how much gold rallied from the lows of December to early January, the pullback we have seen is relatively small. While the market is above $1300 it could continue its wider upward trend.
WTI and Bent Crude are slightly lower as today as the energy market continues to be subdued. There has been a noticeable lack of volatility in the oil market in recent sessions as some traders lock in profits and others appear to sit on the fence. The oil market is still strong and isn’t too far from the multi-year high that was created last week. Traders are still nervous about the political upheaval in Iran, and that is why they are cautious about going short.
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