Europe
After a disappointing start to the month equity markets in Europe have struggled for traction today with the FTSE100 outperforming initially as the oil price nudged above $50 a barrel in the morning session. These gains on the UK market soon unwound in the afternoon session as the news came out that oil ministers had failed to come to an agreement at today’s OPEC meeting in Vienna.
European markets found little encouragement either from today’s ECB meeting as it became apparent that the governing council were content to play a watching brief as the new policies announced in March were given start dates of 8th June for the corporate bond buying program, and the 22nd June for the first of the quarterly TLTRO programs.
Against this backdrop European markets look set to struggle for gains as a lack of risk appetite keeps investors on the sidelines.
The best performer has been Johnson Matthey (LON:JMAT) despite booking a £141m impairment charge which saw profits slide to £386.3m, though shareholders were rewarded with a 5% increase in the total dividend for the year.
On the downside National Grid (LON:NG) is under pressure as it comes under fire for excessive profits, on the infrastructure it charges the energy companies, who use its pipes and cables.
Marks and Spencer (LON:MKS) shares have also slid back sharply after having their target price cut by UBS, even though the bank did reiterate its “buy” rating.
Standard Chartered (LON:STAN) share price is also higher after reporting that it was on course to achieve $1bn worth of cost cut targets.
US
US markets opened lower, following the softer tone in Europe as the OPEC meeting broke up with no agreement on caps, quotas or a freeze on production. With the ECB keeping monetary policy unchanged there was nothing tangible for investors to really focus on given that the latest US ADP employment report came in as expected at 173k.
Weekly jobless claims came in at 267k, slightly better than expected. In the absence of any other catalyst attention now turns to tomorrow payrolls report for May, with a strong report likely to fuel speculation about a possible move on rates at the next Fed meeting in just under two weeks’ time.
In M&A news it’s no more tears for Johnson and Johnson (NYSE:JNJ) as they announced they would be buying shampoo maker Vogue for $3.3bn in cash. The deal is expected to close during the third quarter of 2016.
In the retail sector Costco (NASDAQ:COST) announced that same store sales for May came in flat for May below expectations of a 1.4% increase. Gap’s (NYSE:GPS) numbers come out after the bell.
FX
The European Central bank didn’t spring any surprises today as it left rates unchanged. It did announce the starting date of its corporate bond buying program as well as the starting date of 22nd June for the first of its 4 year TLTRO loan programs, the day before the UK “Brexit” vote. The bank did nudge up its inflation and growth forecasts for 2016, but offset this by warning that downside risks remained.
The Japanese yen has been amongst the main gainers today after Bank of Japan official Sato criticised the banks negative interest rate policy, saying it was having the opposite effect to what was intended. Given that the policy was only agreed by way of a 5-4 majority in January these comments do suggest that the hurdles to taking more stimulus measures could well be quite high.
The pound has managed to regain its footing after the declines of the last couple of days despite construction data slipping to its lowest levels for three years.
Commodities
Oil prices held up fairly well initially ahead of speculation about some form of a quota agreement at today’s OPEC meeting, pushing above $50 a barrel in the morning session. Unsurprisingly the lack of any agreement on a change in policy or implementation of a ceiling saw prices slide back again as once again the market bought into a false narrative.
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