Europe
We’ve seen a slightly weaker tone for European markets today, though that may have something to do with the Whit Monday holiday in Europe more than anything else, with German markets closed.
Basic resources are weaker again despite a positive services PMI number from China as oversupply concerns once again weigh on iron ore, copper prices, with Antofagasta (LON:ANTO), leading the decliners.
Airlines have also slipped back over concerns that an extension to a laptop ban to include tablet devices could cause a revenue loss of up to £1bn globally. It appears that passengers are avoiding routes that have a ban in place according to the International Air Transport Association, (IATA). This would put further pressure on an industry that, while doing well, is already finding margins slim, with EasyJet (LON:EZJ) and British Airways owner IAG (LON:ICAG) near the bottom of the FTSE100.
Amongst the better performers on the FTSE100 has been Royal Mail (LON:RMG) after the company announced a deal to sell two plots from its Nine Elms site in Battersea for £101m so that Telford Homes can build up to 900 build rental properties.
US
After hitting record highs last week US markets slipped lower on the open with the tech stocks leading the decliners. Apple's (NASDAQ:AAPL) share price has been that of a faller after being on the receiving end of a broker downgrade, on the basis that expectations around its new iPhone 8 are already well in the price.
Google owner, Alphabet (NASDAQ:GOOGL) has seen their shares push through the $1,000 level for the first time ever, hot on the heels of Amazon (NASDAQ:AMZN) whose share hit that level last week.
On the data front the latest Markit services PMI pointed to a modest slowdown to 53.6 in May, while the final revision for Q1 unit labour costs showed a fall from 3% in Q4 to 2.2% in Q1.
The latest ISM non-manufacturing survey for May was also lower than expected coming in at 56.9, down from 57.5 in April.
FX
Despite a weakening in services PMI for May to 53.8 from 55.8 in April, the pound has held up rather well in the wake of the weekend terror attacks. If financial markets are nervous about Thursday’selection and a weakening of economic activity they don’t appear to be showing it, with opinion polls still showing divergent results.
YouGov appear to be doubling down on their recent survey by suggesting that the Conservatives will fall short of a majority by 21 seats, while the latest ICM poll shows a lead of 11 points. Markets appear to be taking the view that the YouGov poll is an outlier and unreliable which when you look at the margin for error on it, and the balance of probabilities right now, seems a sensible conclusion.
The Australian dollar is the best performer today after the latest data from Caixin showed that the Chinese services sector posted its best numbers in four months, and helping offset concerns about a slowdown in the manufacturing sector.
After several days of strong gains the euro has slipped back ahead of this week’s European Central Bank rate meeting, after the latest services PMI numbers from Spain, Italy and France and Germany prompted some profit taking from 6 month highs.
Commodities
Crude oil prices initially rebounded from Friday’s lows after Saudi Arabia and its allies cut off diplomatic and economic ties with Qatar, over its ties with Iran, and other Islamist groups in the region.
Any escalation of tension in this region particularly given the narrowness of the Straits of Hormuz isn’t generally viewed through a positive lens, and with oil prices near one month lows we did initially see some cautious buying, however given how small Qatar is in terms of output today’s rally soon gave way to further selling pressure, as fears about OPEC disruption were put to one side.
Gold prices have risen to their highest levels since late April on some risk aversion buying, post the weekend attacks as well as rising expectations that the US Fed’s tightening cycle may not be as aggressive as we head into the rest of the year.
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