Europe
European stock markets are strong going into the close as broadly positive data has helped the equities. Eurozone indices like the DAX and CAC 40 are the standout performers of the day as German unemployment and eurozone GDP numbers were well received.
The mining companies were mixed today even though the Caixin survey of Chinese manufacturing for July came in at 51.1, while economists were expecting a reading of 50.4. The report marries up with the official figures from Beijing yesterday which showed the manufacturing sector is in expansion, although growing at slower rate. Either way, expansion in China’s manufacturing industry bodes well for basic resources stocks. Rio Tinto (LON:RIO), BHP Billiton (LON:BLT) and Anglo American (LON:AAL) are in the red, while Glencore (LON:GLEN) is higher on the day.
Rolls Royce (LON:RR) shares have rocketed higher today on the back of profits more than doubling, and coming in higher than dealers anticipated. The engineering company made improvements in relation to costs and it is ‘improving the economies of making the engines’. It is encouraging to see the company improve efficiency, but it is worth pointing out that a portion of the jump in profit was down to currency movements, so the numbers aren’t as glowing as they seem.
BP (LON:BP) shares are in the black today after the company revealed second-quarter profits that came in ahead of analysts' estimates. The upstream business saw production increase by 10%, and the profits from the division were well ahead of what traders were expecting. The company registered a $750 million charge after it walked away from an operation in Angola. The oil company saw its debt level rise, which is slightly concerning seeing as it is still paying off the costs related to the Deepwater Horizon disaster.
US
US equity markets are holding up well. The Dow Jones is eyeing 22,000, and the S&P 500 and Nasdaq 100 bounced back after day’s negative move.
The major US indices having registered record highs recently, even though we may see the odd pullback, the bullish sentiment won’t be shaken off lightly.
As always, investors are unnerved by goings on in the White House and by the looks of it, we would need to see a major scandal break before traders get spooked. Changes in Trump’s administration are now becoming the norm, and dealers are getting used to it.
The drop in US construction spending and the decline in the expansion rate of the ISM manufacturing report tells us the US economy may not be ready for any more interest rate hikes this year, and equity traders would welcome interest rates remaining on hold for the time being.
FX
The EUR/USD traded above $1.18 as the positive run by the single currency is extended, but the currency pair dipped below it in the afternoon. We are now in August, and later this month the European Central Bank President, Mario Draghi, will deliver a speech at the Jackson Hole symposium. There is increased speculation that he will talk about reducing the size of the monthly bond buying scheme. The figures from the eurozone today showed the bloc grew by 2.1% in the second-quarter on a year-on-year basis. And that compares with the 1.9% growth for the same period last year.
The GBP/USD is holding onto the $1.32 mark as the upward move the currency pair has been in since the start of the year continues. The pound hit its highest mark versus the greenback since September 2016, and the positive run is showing no signs of running out of steam. The pound was helped by the recent UK manufacturing numbers, which came in a 55.1, and the consensus was 54.4.
Commodities
Gold was pushed slightly lower after the US revealed the core personal consumption expenditures (PCE) in June remained at 0.1% on a month-on-month basis, meeting economist’s expectations. The year-on-year figure ticked up to 1.5% from 1.4%. The downward move didn’t last long as US construction spending data and the ISM manufacturing PMI report both fell on the month and undershot analysts’ expectations. This pushed gold back north of $1270.
Brent oil and WTI are in the red as a survey from Reuters found that OPEC production actually increased in July, even though the members are supposed to be freezing output. The report prompted traders to take their profits from a recent bullish run. The move lower today may not last long, as some major producers are meeting next week to talk about getting increased adherence to the coordinated production cut.
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.