UK and Europe
Stock markets drifted lower in listless trading on Monday amid a temporary pause in company reporting as data showed a decline in German business confidence. A choppy oil price and nerves ahead of important central bank meetings from the Federal Reserve and the Bank of Japan later this week contributed to lower trading volumes.
Markets appear to have reached another tipping point with European stocks erasing this year’s losses as US stock averages near old records. The actions or at least language from the Federal Reserve as well as quarterly results from corporate heavyweights like BP (LON:BP) and Apple (NASDAQ:AAPL), both reporting on Tuesday, could dictate whether this rally still has legs.
The energy sector was lower after Shell (LON:RDSa) announced a voluntary severance program and the closure of BG Group’s head office ahead of results from BP on Tuesday. Defensive sectors including utilities and consumer staples were best performers, helped by a broker upgrade to Imperial Brands (LON:IMB).
The main focus for UK business news has been the bankruptcy of privately-held BHS. There appears to be little in the way of read-across from BHS to listed retailers. Shares of Next (LON:NXT) were lower while Sports Direct (LON:SPD) and M&S (LON:MKS) shares were higher.
BHS has failed to stay relevant as fast-fashion shops like Zara and H&M have forced the traditional department stores to up their game. Next has proven adept at shifting its catalogue business online. M&S would probably find itself in similar position to BHS were it not for its food shops.
The near demise of BHS speaks volumes about the state of the British high street. Consumer spending is moving online and towards a sharing economy where the internet makes selling second-hand goods easy. Tastes have also showed signs of shifting towards spending on ‘experience’ not ‘stuff’, giving travel and leisure a boost over clothing and electronics stores.
US
US markets fell in early trading with the Dow Jones Industrial Average backing further away from 18,000 after new home sales unexpectedly fell for a third month and oilfield services firm Halliburton (NYSE:HAL) delayed first quarter results but announced it had cut 6000 jobs.
The job cuts at Halliburton have some in response to a slump in oil drilling where the US rig count has fallen to the lowest since records began. Halliburton has delayed reporting until May 3rd, after the deadline for its proposed merger with Baker Hughes (NYSE:BHI) which is due to report on May 27th.
FX
The US dollar was uniformly lower against major trading partners on Monday after weaker than expected housing data.
A surprise drop in German business confidence in April according to the IFO has been largely ignored by euro traders amid speeches from the ECB’s Constancio, Coeure and Nouy.
The “Obama-effect” appears to have taken hold of sterling. GBP/USD pushed above 1.45 to its highest in over a month.
The yen regained some its losses from Friday as no new information was leaked on possible new stimulus measures from the Bank of Japan this week. On Friday it was reported the BOJ may introduce negative rates on bank loans.
Commodities
The price of oil chopped between gains and losses as gold and silver gained ground after sharp losses at the tail end of last week.
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