Europe
The FTSE 100 is being helped along by financial stocks as HSBC, Barclays (LON:BARC) and Prudential (LON:PRU) are higher on the session. Continental Europe is underperforming as the DAX and CAC 40 are in the red. Volatility has been low today as traders await the Federal Reserve meeting at 7pm (UK time) and the press conference that follows at 7.30pm (UK time).
Dixons Carphone (LON:DC) posted a 60% fall in first-half profits to £61 million, but that included a one-off cost of £58 million. The company is planning on overhauling its mobile business and they will try and make it ‘less capital intensive’ and they want to make the business ‘simpler’. The share price is up 7% today, but has been in decline since for two years, and if the wider negative move continues it could fall to 120p.
Tui AG (LON:TUIT) shares are up 0.8% as the firm announced solid full-year figures. The company revealed an 11.7% increase in revenue and a 12% rise in underlying pre-tax profits. The travel company stated that demand was improving across most regions, and Europe was the stand-out performer. The firm is seeing increased demand for holidays to Turkey and North Africa, but cruises in the Caribbean are still ‘subdued’ due to the hurricanes earlier in the year.
US
The Dow Jones and S&P 500 have set fresh record again as the bullish sentiment knows no bounds. The Nasdaq 100 is in positive territory too, is closing in on its all-time high.
The volatility index (VIX) is down 0.9% and traders will be counting down until the US central bank gives its update. The market has been pricing in an interest rate hike of 0.25% for a few months now. The press conference that follows is likely to be the more important event, even though in a few months’ time the make-up of the Fed will be very different, and therefore difficult to predict their outlook for 2018. Until we get updated with whom the new members of the Fed are, dealers are likely to be cautious when it comes to second-guessing the Feds policy next year.
The headline US inflation rate ticked up to 2.2% from 2% - meeting expectations, but the core inflation rate cooled to 1.7% from 1.8%. The reports suggest underlying demand is waned a bit, which is likely to disappoint the Fed.
FX
GBP/USD had a volatile session as the pound rallied on the run up to the release of the latest UK unemployment and earnings figures, but then dipped after the jobless rate remained unchanged and the monthly average earnings figure ticked up. The pound was given a boost by the softer than anticipated core US inflation rate.
EUR/USD was given a boost by the latest core CPI figures from the US. The greenback has had a positive run in recent weeks, and the worse than anticipated core inflation figures prompted some profit taking. Today’s move in the euro is more down to a dollar decline, rather than euro strengthen.
Commodities
Gold is being propped up by the soft US dollar and there is an element of short covering ahead of the Fed meeting later. The metal fell to a five month low during the week as traders were gearing up for a rate hike from the Fed tonight. We could see low volatility as the meeting draws nearer.
WTI and Brent Crude were already in retreat since the morning, and the latest inventory figures from the energy information agency (EIA) accelerated the decline. US oil stockpiles fell by 5.11 million barrels, and the consensus was for a decline of 4 million barrels. It was the gasoline figures that pushed the market lower. Gasoline inventories increased by 5.66 million barrels, while dealers were expecting a rise of only 2.3 million barrels.
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