Europe
Stock markets are largely lower heading into the close as volatility is low. In London, the FTSE 100 is being weighed down by consumer and mining stocks. It was been a lacklustre week for European markets, partially because of the May Day holiday, but also a lack of any major macro-economic news.
The DAX is outperforming in Europe, despite the dreadful manufacturing numbers.
Metro Bank (LON:MTRO) shares sold-off sharply after the company announced its first-quarter update after the close yesterday. Frist-quarter profit before tax halved to £4.3 million, and revenue jumped by 17% to £107.5 million. Net interest margin in the first three months was 1.64%, and that compares with the 1.76% in the final-quarter of 2018.
The negative publicity the company endured in recent months in relation to the accounting error prompted a ‘small number of large commercial and partnership customers’ to take their business elsewhere. That client base accounted for approximately a 4% decline in quarter-on-quarter in deposits. The bank acknowledged that sentiment has been soured by the accounting error, and it confirmed that progress has been made in relation to ‘implementing strategic initiatives’. Ultimately, the firm needs to convince investors there won’t be repeat of that accounting mistake.
Royal Dutch Shell (LON:RDSa) shares are in demand after the company announced solid first-quarter figures. Profit dipped to $5.4 billion, but it comfortably topped the $4.5 billion. On a year-on-year basis, the upstream and downstream businesses saw 11.2% and 3.1% increases in profit respectively. Earnings at the integrated division was higher too. The oil titan will increase the speed of its share buyback scheme, and that projects a positive image, but the debt to equity ratio has edged up to 21.9%, and the firm’s target is 20%.
Lloyds (LON:LLOY) revealed its first-quarter numbers. Pre-tax profit increased by 2% to £1.6 billion, but missed forecasts, and revenue edged higher by 2%, and also undershot analysts’ estimates. On the bright side, operating expenses also came in below forecasts. The PPI saga continues as the bank set aside another £100 million for the mis-selling of the cover. The net interest margin slipped by 0.02% to 2.91%, which is good when compared with its peers.
US
The Fed’s assessment of the US economy last night was more upbeat that investors had expected, and even though the S&P 500 started today’s session in the red, it has now swung to positive territory. The Nasdaq 100 continues to outperform in the US, and it has clawed back a lot of yesterday’s gains.
Tesla (NASDAQ:TSLA) revealed plans to raise over $2 billion. The company plans to raise the bulk of the funds of via convertible notes, and the remainder from new equity. The auto maker is seeking to raise fresh capital in order to meet its Model 3 production targets. The stock is higher today.
Caterpillar (NYSE:CAT) confirmed it will increase its quarterly dividend by 20% to $1.03. Last month the company posted quarterly EPS and revenue that topped forecast, but the group warned of aggressive price competition, and it cautioned about possibly of losing a ‘little bit’ of market share in China. It seems strange that the firm is increasing its cash returns to shareholders, when it foresees tougher competition on the horizon.
FX
The US dollar index is higher today in the wake of the Fed meeting last night. The fact the US central bank mentioned that economic growth and the jobs market were solid, suggests the US central bank are not edging towards cutting rates. The Fed weren’t especially hawkish, but they were more hawkish that expected.
EUR/USD has been hit by the firmer US dollar. The major eurozone countries published their manufacturing PMI reports, the Italian, French and Spanish reports all edged higher, while the German report slipped back to 44.4, from 44.5.
GBP/USD has also been hit by the stronger greenback. There was some positive news from the UK today, the construction PMI report came in at 50.5, which was an improvement on March’s 49.7 reading. The Bank of England (BoE) kept monetary policy on hold, meeting forecasts. Mark Carney,the BoE chief, issued a mixed update ,whereby he raised the growth forecast, but cautioned about lower inflation ,so traders were left wondering which way to look.
Commodities
Gold is in the red as the nudge higher in the US dollar hurt the metal. Lately the inverse relationship between the metal and the commodity has been strong. Gold is close to last month’s low, and should it break below the $1,266 area, it might pave the way for the $1,250 region to be tested.
Oil has sold-off on the back of yesterday’s Energy Administration Information report, which showed that US oil inventories surged by 9.9 million barrels – it’s largest since September 2017.
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