Europe
Italian markets have gravitated higher after yesterday’s sharp losses while Europe’s core markets have struggled to make any sort of headway, one way or the other.
As far as the FTSE 100 is concerned while we exceeded yesterday’s low there was a distinct lack of momentum to keep it down at those lows, unlike the FTSE 250 which has undergone another steep decline, pushing it to its lowest levels this year.
This probably isn’t as surprising as it might first appear given that since October 2011 the FTSE250 has risen to the tune of 75%, contrasting with a FTSE100 performance of 35% which suggests that FTSE250 valuations may be more broadly stretched, even allowing for a recovery in the UK economy. Given this outperformance it seems likely that there will inevitably be greater scrutiny on valuations as the economy continues to recover.
The worst performers today have been in the travel sector with TUI Travel Plc (LONDON:TT) down sharply, probably as a result of the recent news about Kenyan holiday evacuations, as UK travel firms suspend holidays to the region on the back of Foreign Office advice.
Basic resource stocks are also lower with Anglo American (LONDON:AAL) on the slide along with Fresnillo Plc (LONDON:FRES) as iron futures declined to their lowest levels since April last year, and copper prices also declined for the second day in a row.
On the plus side supermarkets are the best performers today with Morrison(Wm.) Supermarkets (LONDON:MRW), Tesco (LONDON:TSCO) and Sainsbury(J) (LONDON:SBRY) heading up the FTSE leader board, with vague chatter surrounding a possible bid for Morrisons from a US private equity group.
US
US markets opened slightly higher today after yesterday’s sell off after housing starts for April jumped 13.2%, well in excess of expectations of 3.6%. Building permits also rose 8% but these sorts of bounce backs shouldn’t really be too much of a surprise given that both measures have been held back by the severe US winter weather.
On the downside the latest University of Michigan consumer sentiment came in less than expected for May at 81.8, well below expectations of 84.5, and this weak reading appears to be currently capping the upside, as concerns grow that we may not get the bounce back in the US economy that is currently being price in by equity markets.
In earnings news the US retail sector was back in the spotlight as JC Penney Company Inc Holding (NYSE:JCP) rose sharply on the open after reporting a smaller than expected loss for the most recent quarter.
Another retailer Nordstrom Inc (NYSE:JWN) also beat expectations.
FX
Today’s better than expected US economic data has helped stabilise the US dollar today, though it remains under pressure in the short term. While US yields have stabilised somewhat they still remain at multi month lows.
The pound has stabilised a little after this week’s broad sell-off as some end of week profit taking kicks in ahead of next week’s inflation numbers and the latest minutes from the last Bank of England rate meeting.
Despite this week’s rather dovish commentary from Bank of England governor Mark Carney we can probably expect to see some signs of dissent amongst some MPC members with respect to the timing of a future rate rise, when we get sight of the latest Bank of England minutes which are due to be released next week.
Commodities
Brent crude oil prices have had their best week for four weeks on the back of concerns that events in the Ukraine are more likely to get worse than better. With new elections next week the prospect of a further escalation seems high, particularly as separatists will be keen to disrupt or delay any attempt to legitimise the current government in their eyes.
US Secretary of State John Kerry warned Russia that any attempt to interfere with next week’s elections would be met with further sanctions.
Another thing helping underpin supply was the announcement by the IEA that OPEC would have to supply an extra 800k barrels a day in order to meet demand in the second part of this year.
With US stockpiles also slipping to their lowest levels since 2008, we’ve seen US oil prices also rise this week for the first time in a month.
It’s been a fairly quiet low key session in Europe today after yesterday’s sharp losses with investors reluctant to take on too much risk either way ahead of the weekend.