Europe
European equity markets were mixed yesterday, but London’s large exposure to commodity related companies gave it the edge over its eurozone counterparts. The better-than-expected growth numbers from China boosted the share price of Rio Tinto (LON:RIO), Glencore (LON:GLEN), Anglo American (LON:AAL) and BHP Billiton (LON:BLT). The second-largest economy in the world is easily on target to achieve its 2017 growth target of 6.5%, as it grew by 6.9% in the first quarter and second quarter.
After enduring a collapse in their share price last week, Carillion (LON:CLLN), was thrown a life-line yesterday when they were awarded a contract in relation to the HS2 rail project. The company has been suffering from cash flow problems as some of their clients have been slow to pay, and that contributed to the profit warning last week and the departure of the CEO. Investors were quick to go bargain hunting yesterday after it was revealed that the company landed a contract was worth £450 for itself. Its partners in the joint venture, Eiffage (LON:0NPT) and Kier (LON:KIE) have guaranteed the completion of the project. Carillion’s share price is up 17%.
US
The Dow Jones and S&P 500 were fractionally in the black yesterday as the bullish sentiment from last week still lingers. Record highs for both US indices were achieved on Friday as positive quarterly updates from US banks and weaker than expected inflation data gave traders a reason to buy.
On Friday, Citigroup (NYSE:C), Wells Fargo (NYSE:WFC) and JPMorgan (NYSE:JPM) ensured that the US reporting season for financials got off to a strong start, and the tepid CPI and retail sales numbers assured dealers that they won’t be seeing an interest rate hike from the US in the near-term. Last week, Janet Yellen, the Federal Reserve Chair, said the US central bank is going to continue to keep tightening its monetary policy, but investors felt she wasn’t in an y hurry to raise rates, and in light of the US data on Friday, we may now see another rate hike in 2017.
BlackRock (NYSE:BLK) posted second-quarter earnings per share (EPS) and revenue that came in below estimates, but the assets under management (AuM) topped expectations. The stock is down 3%.
FX
The EUR/USD was a touch weaker on the session as traders book their profits. The single currency has been in a solid upward trend versus the US dollar since December 2016, and the positive data from the eurozone and the optimistic comments from the European Central Bank chief, Mario Draghi, has boosted the euro. Adding to that, dealers aren’t too worried about an interest rate rise from the US in the short-term. Eurozone CPI in June dropped to 1.3% from 1.4%, while the core CPI creeped higher to 1.2% from 1%. Mr Draghi previously lowered his inflation outlook for the region, but it is encouraging to see that the core figure ticker higher.
The GBP/USD has handed a small bit of last week’s gains. A mixture of hawkish comments from Ian McCafferty, of the Bank of England, and disappointing US inflation and retail sales boosted the pounded versus the greenback. Sterling has been climbing against the US dollar throughout 2017, and yesterday’s pullback could entice new buyers as the outlook is still positive for the pound.
Commodities
Gold was at a two-week high as the surge from Friday’s rally continues. The metal has traded above its 200-day moving average –which traders are viewing as a positive sign. The muted inflation and retail sales numbers from the US on Friday have pushed back the likelihood of an interest rate hike from the Fed, and dealers are snapping up gold on the back of it.
WTI and Brent Crude oil were broadly unchanged on the day as US oil production fractionally ticks higher. On Friday, the Baker Hughes report showed that the number of active rigs in the US increased by 2 to 765. The gradual increase in active rigs tells that over-supply is still a problem, and that demand isn’t too high either, as the growth rate in the rig count is marginal.
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