FTSE Lower As Housebuilders Drag, European Equities Mixed Ahead Of ECB

Europe

Stocks in Europe are a mixed bag this afternoon as the stalemate regarding North Korea is still ongoing. The FTSE 100 and IBEX 35 are a touch lower on the day while the DAX, CAC 40 and the FTSE MIB are in positive territory. Some European markets are performing better than others, but the broad decline that has been in place since the start of the summer is still intact. The European Central Bank (ECB) meeting and press conference tomorrow will be the focus of trader’s attention.

The ECB chief, Mario Draghi, is expected to mention the strength of the euro, and how it is holding back the eurozone recovery. Any signs the ECB are getting nearer tapering, may put pressure on eurozone stocks.

Barratt Developments (LON:BDEV) posted a strong set of figures today, but it wasn’t enough to satisfy traders as the forecast was only lukewarm. The home builder expects ‘modest’ growth next year because higher stamp duty and slightly lower demand in the London market prompted the company to issues a cautious outlook. The healthy jump in dividend, record completions and record profits were over shadowed by underwhelming forecast. Taylor Wimpey (LON:TW) and Persimmon (LON:PSN) are down on the day too.

US

The Dow Jones and the S&P 500 are pulling back some of last night’s losses. The severe decline yesterday has prompted short covering and bargain hunting today.

US equities came were nudged lower by the news that Stanley Fischer, the vice-chair of the Federal Reserve, is stepping down next month. The move was unexpected, and triggered some selling.

The same old political uncertainties surrounding North Korea haven’t gone away, but for now traders are becoming immune to all the bluster. While there is no new negative news, we may see some buyers enter the fold.

The clean-up costs of tropical storm Harvey could be in the region of $180 billion, and we might see the US government find the funds for this while increasing the debt ceiling. Politicians from both major parties in the US are very unlikely to oppose a proposal that would see funds poured into Texas and Louisiana.

FX

The EUR/USD is marginally higher on the day and volatility has been low today. We had underwhelming economic announcements from the eurozone and the US today. German factory orders dropped by 0.7% in July and both the US services PMI and ISM non-manufacturing PMI came in below estimates.

The Beige Book update from the US tonight will be closely watched.

The GBP/USD has been pushing higher for nearly two weeks and it is holding firmly above the $1.30 mark. The pound had a disappointing August against the US dollar and now we are seeing the bounce back continue. There were no major economic announcements from the UK today, and the move has been down to US dollar weakness.

The resignation of Stanley Fischer, put added pressure on the greenback.

Commodities

Gold is in the markets good books and the positive run that it has enjoyed lately is still intact. The metal hit a new one year high yesterday, and there are no sings the bullish run is over. The slight decline in the US dollar today is helping the metal along.

The dovish comments from Lael Brainard and Neel Kashkari yesterday are also playing into gold’s positive run.

WTI and Brent Crude are higher today as the demand for oil is rising, now the clean-up of tropical storm Harvey is getting under way. As US oil refineries are getting back into action, the demand for oil is ticking up.

The fears in relation to Hurricane Irma are also driving up the price of oil, as the production of the energy could be disrupted.

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