UK and Europe
Stocks in Europe erased early gains and slid into negative territory as oil and resource shares dropped amid falling commodity prices.
Lower than normal trading activity in the shortened holiday week left early gains with nowhere to go. Volatility has noticeably dropped off this week as evidenced by the relatively benign reaction to yesterday’s atrocities in Belgium.
Credit Suisse (SIX:CSGN) is leading gains on the continent after announcing more cost cuts.
Travel and leisure stocks staged a recovery on Wednesday with Carnival (LON:CCL) and Merlin Entertainments (LON:MERL) recouping losses brought on by the attacks in Brussels.
Shares of Kingfisher (LON:KGF), owner of DIY chain B&Q gained after beating forecasts with a 0.3% rise in annual profit in constant currencies and offering a confident outlook based on the success of its turnaround efforts. There was some initial disdain for Kingfisher’s turnaround plan but today’s results confirm the company has gotten a head start over its rival Homebase which will later be remodeled by Westfarmers.
The fall in the shares of Sports Direct (LON:SPD) steadied when the company issued a statement to clarify its full-year earnings forecast after remarks from founder Mike Ashley in a newspaper report that prompted a 10% slide on Tuesday.
US
US markets slipped in early trading as oil and resource shares led declines amid a rally in the dollar and drop in commodities.
The devalued dollar had given some extra oomph to the rally in US stocks and its recovery over the past four days is having the opposite effect.
Shares of Virgin America (NASDAQ:VA) soared doubled digits on reports the airline may be put up for sale. The company is part-owned by Richard Branson’s Virgin Media. It’s a bit of a shock that Branson would look to sell Virgin America less than two years after taking it public. Listing on a public exchange is typically a means to raise cash to fund future growth so selling the company is doing a bit of a one-eighty.
FX
The dollar was bid again on Wednesday after Fed member James Bullard suggested that a rate hike should be a possibility in April in an interview. Mr Bullard said that every FOMC meeting should be a “live meeting.” Mr Bullard also shared his opinion that the Fed should do away with forward guidance including the dot plot.
The interview with Mr Bullard did little to change the hawkish tone from Fed officials this week that has seen the dollar rise for four days on the trot.
The Swiss franc was the strongest currency after the SNB released its quarterly bulletin whilst the New Zealand dollar was the weakest amid a fall in commodity prices.
Commodities
A fourth day of dollar strength is undermining the whole commodity patch. Oil, gold, silver and copper all saw significant declines on Wednesday.
Investors were pulling funds out of safe havens on Wednesday as sentiment recovered the day after terror attacks struck Brussels. When gold and silver couldn’t maintain healthy gains as a haven after a terrorist attack it was a sign of weak demand. Silver dropped over 4% whilst gold fell to its lowest since late February.
Another huge build in weekly oil inventories coupled with dollar strength sent oil prices lower. Given the extent of the 9.36m barrels overshoot of expectations of just 3.1m, the 2% drop is actually quite mild and could be a precursor to a higher oil price of the dollar stabilises.
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