Europe
Equity markets in Europe are in the red today as tensions surrounding North Korea were heightened again on the back of the nuclear bomb test carried out by the regime over the weekend. Traders are clearly nervous, as stocks are lower, but the sell-off today hasn’t been as bad a previous ones. This suggests that dealers are getting somewhat used to the situation. The fear-factor is certainly doing the rounds, but investor’s nerves are a bit more resilient this time around.
Randgold Resources (LON:RRS) and Fresnillo (LON:FRES) are higher on the day as the underlying gold and silver markets are strong due to the risk-off strategy adopted by traders. The metals are deemed to be safe havens, and in turn we are seeing demand for the companies that mine those metals. Randgold Resources hit its highest level in over a year, so the momentum is with the bulls.
A slowdown in the growth rate of the British construction sector has put pressure on Persimmon (LON:PSN) and Barratt Developments (LON:BDEV) are down 1.2% and 1.3% respectively.
US stock markets are closed for Labour Day.
FX
The EUR/USD is up on the session thanks to an increase in eurozone investor confidence and a broad decline in the US dollar. The sentix investor confidence report for September came in at 28.2, while the consensus was for 27.4 – the August report was 27.7. On Thursday, the European Central Bank (ECB) will conduct their next meeting, and traders are speculating the ECB chief, Mario Draghi will state his is concerned about the strength of the euro. Any signs the ECB could be edging towards tapering, could push the single currency higher.
The GBP/USD is largely unchanged on the day, and the weaker than expected UK construction PMI data put pressure on the pound. The British construction report came in at 51.1, down from 51.9 in July, and traders were expecting 52.1. Volatility is low today as US traders are not working as they are celebrating Labour Day.
Commodities
Gold hit a level not seen since late September 2016 today as the investors flock to the metal on the back of rising tensions in relation to North Korea. Some of the money that is pouring out of global stock markets is heading for gold as dealers would rather have their funds in a lower-risk asset. Whenever equities are under pressure, gold tends to do well, and that is what we are seeing today. The creation of nearly a 12-month high tells us the buyers are driving this market.
The price gap between Brent Crude and WTI is narrowing as Brent Crude is lower and WTI is higher today. The clean-up from the tropical storm Harvey is under way and previous widening of the price between the two oil markets is being reserved. WTI is in demand as oil refineries in the US have taken one step closer to re-opening. We are not going to see business as usual for some time, but at least things are improving, and that will point to an increased demand for WTI down the line when operations are back to normal.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.