Europe
The FTSE 100, DAX and the CAC are broadly unchanged. The major indices in Europe have been flickering in between positive and negative territory but the common theme is a small trading range. Stocks are relatively quiet today after the Fed revealed the minutes of its latest meeting last night. The US central bank is happy with the recovery, but they would like to make sure the recovery continues before increasing interest rates again.
Shares in Wizz Air (LON:WIZZ) hit an all-time high today after the budget airline posted a 10% rise in revenue, and passenger numbers were up 19%. The airline aims to increase capacity by a double digit rate over the next 12 months. The share price is £21.82, up 12%.
Halfords (LON:HFD) shares have shrugged-off the decline in profits, and are 3% higher on the day. The company revealed a 2.7% increase in like-for-like sales, but pre-tax profits dropped by 10.5%. Weakness in the pound was sighted as a reason for the drop in profits, but the company’s CEO Jill McDonald is confident that their long-term plans will make up for it in time.
US
The Dow Jones and the S&P 500 are trading higher today as investors welcomed the update from the Fed last night. The minutes from the latest Fed meeting showed that policy makers are optimistic about the state of the US economy, but they would like to see more evidence of the recovery before tightening monetary policy again. The Fed funds futures market is pricing in a 100% chance of an interest rate hike next month but we do have some way to go before the next meeting. Donald Trump’s trip to the Middle East and Europe has taken the focus away from his row with the FBI, but that story hasn’t gone away. The political uncertainty surrounding Mr Trump is causing concern for the Fed.
Best Buy (NYSE:BBY) announced a 1.6% rise in same-store-sales for the first quarter, and that was a pleasant surprise as the market was anticipating a fall of 1.5%. Earnings per share (EPS) fell from 70 cents to 60 cents, but that was well ahead of the 40 cents that traders had expected. The share price is up 16%.
FX
The US dollar is broadly lower since the Fed meeting minutes were reported last night. There are some expectations of course, but generally the greenback is weaker as currency traders don’t believe the Fed will increase interest rates next month. The Fed fund futures might be pointing to an interest rate increase next month, but the performance of the US dollar since the rate hike in March shows a different story. The minutes were from the meeting at the beginning of May, and the US has reported some weak data since then, and when you factor in the scandal surrounding Mr Trump, there is no guarantee that interest rates will be moved higher in June.
The GBP/USD is lower on the day after the UK revised its growth for the first quarter from to 0.3% to 0.2%.
The EUR/USD has lost ground this morning but it is still above the 1.12 level. There recent positive run of economic data from the eurozone has led to some speculation that the European Central Bank (ECB) will tighten its loose monetary policy, but the bank’s chief, Mario Draghi is content to keep the policy unchanged for now.
Commodities
Gold has given back some of the gains it made earlier in the day as traders are still fearful of an interest rate hike from the US next month. The update from the Fed last night didn’t give a whole lot away. The US central bank has raised rates twice in the past six months, and they appear to be content to keep raising them as long as the economic indicators call for it. Some concerns were voiced about the soft economic announcements in the early part of the year, and the Fed would like to see things improve before they give the go-head for another hike.
WTI and Brent Crude are pulling back some of the losses they suffered after the severe sell-off this morning. Oil reached a five week high this morning on the run up to the OPEC meeting today, but once the nine month extension to the production cut was confirmed, traders quickly cashed in their positions. The production cut extension might be extended again but that will be discussed early next year.
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