Europe
The FTSE 100 lagged behind the European equity markets yesterday, but today the London market has bounced back more, and has outperformed its continental counterparts. Bargain hunting, along with a steady pound helped the British market.
The bullish move in copper and Iron ore prices has driven up the share prices of Rio Tinto (LON:RIO), BHP Billiton (LON:BLT), Glencore (LON:GLEN), and Anglo American (LON:AAL). BP (LON:BP) and Royal Dutch Shell (LON:RDSa). All of which are in positive territory as the energy market is stronger as Saudi Arabia stated it would cut its oil exports in August. The commodity stocks are very sensitive to the underlying metals and energies, and the FTSE 100 has a disproportionately large amount of natural resource companies when compared with other European indices.
BMW (DE:BMWG) and Volkswagen (DE:VOWG_p) shares in still in the red, but Daimler (DE:DAIGn) is higher on the day, as the investigation by the EU antitrust into their activities is still on traders’ minds. It was alleged that the German car makers were colluding with each other over things like supplier costs and diesel emissions treatment. Volkswagen were hit with an enormous fine when they were found guilty of rigging their diesel emissions tests and investors remember the impact it had on their share price.
US
The S&P 500 has yet another record high as a number of major American companies posted solid earning’s. The broader US equity benchmark pushed higher as we had earnings updates from traditional blue-chip equities – which were well received.
Caterpillar (NYSE:CAT) had a great second-quarter update as the earnings per share (EPS) and the revenue came in well ahead of expectations and the full-year guidance was upped for the second time this year also. Mining companies are going out and increasing capital spending again as the industry has turned a corner, and the construction sector has a healthy demand for heavy equipment too. The share price is up 4.5% today, and it has been in a solid upward trend for the past 18 months.
McDonald’s (NYSE:MCD) hit a record high today on the back of an impressive set of second-quarter numbers. The fast food titan revealed EPS and revenue that exceeded analysts’ estimates. US same-store sales jumped by 3.9%, and analysts expected it to increase by 2.9%. Global same-store sales increased by 6.6%. McDonald’s is planning on rolling out more restaurants that have table services, and ordering kiosks as a way of promoting the ‘experience of the future’ service.
FX
The EUR/USD hits its $1.17 today, a level not seen since August 2015, as the German Ifo business climate increased to 116 in July, up from 115.1 in June. The economic indicators out of the US today were mixed, but it wasn’t enough to prevent the US dollar weakening. Traders aren’t that confident the Federal Reserve will hike interest rates again this year, and that is why the greenback is falling.
The GBP/USD befitted from the soft US dollar today as the currency pair held above the $1.30 mark, even though the UK Confederation of British Industry (CBI) industrial order expectations came in at 10 in July, and the consensus was for 11. Today was largely a poor day for the greenback rather than a strong day for sterling. Andy Haldane, of the Bank of England, will speak in London at 6pm.
Commodities
Gold has been hit by some profit taking today as the metal has had a good run over the past two weeks. The strength of the global equity markets is an indication that traders are willing to take on more risk today, and risk-on days usually see the price of gold fall. It is slightly unusual to see gold softer on a day when the US dollar is down too, but the inverse relationship hasn’t always held up.
WTI and Brent crude oil are continuing on from yesterday’s rally as Saudi Arabia intends to cut oil exports next month. OPEC instructed its members to comply with the coordinated production cut at the meeting in Russia yesterday. Nigeria, who had been exempt, chose to comply with the cut, this is adding to the push higher in prices.
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