Europe
Europe’s markets have enjoyed a much better time of it today with the FTSE100 once again outperforming due to a rebound in some of the bigger fallers over the past few days, as well as continued outperformance from the basic resources sector.
This week’s sharp selloff in Lloyds Banking Group (LON:LLOY) and Royal Bank of Scotland (LON:RBS) shares has prompted some speculation that we could well have seen the worst of the declines and prompted some investors to start drip feeding money back into the shares.
Yesterday RBS share price hit its lowest levels since the height of the financial crisis at 148.45p or 14.84p in old money before the bank implemented its 10 for 1 share swap deal 4 years ago.
Also enjoying a brief respite house builders and real estate companies have rebounded strongly though this could just be no more than a brief pause for breath, particularly since nothing has changed in the last 24 hours, with British Land (LON:BLND) and Land Securities (LON:LAND) enjoying some decent gains.
A better than expected rise in the Halifax house price index in June, along with recent fairly upbeat comments from Persimmon (LON:PSN) yesterday has seen share prices in the sector rally after three days of losses, with Barratt Developments (LON:BDEV) and Taylor Wimpey (LON:TW) also gaining, though the failure to close near the highest levels of the day suggests that the rebound may not be on the firmest of foundations.
On the retail front it’s been a mixed picture with Marks and Spencer’s (LON:MKS) latest trading update showing an 8.9% fall in clothing sales in the first quarter. Even the company’s food division saw a 0.9% fall in like for like sales, with new CEO Steve Rowe warning that consumer confidence was a little on the weak side.
On the flip side Primark owner Associated British Foods (LON:ABF) has risen sharply after reporting a 7% rise in sales and that it remained optimistic about the UK economy and that it was sticking to its plans to extend its stores footprint across Europe and the US as well.
US
The rebound in US markets last night continued today on as share prices opened higher, as European markets managed to maintain their firmer tone against an improving US economic outlook and firmer oil prices.
Stocks in focus include Pepsico (NYSE:PEP) after the company announced Q2 profit of $1.35 a share, as both revenues and profits exceeded expectations.
On the technology front hard disk drive maker Western Digital (NASDAQ:WDC) raised its Q4 guidance for the final quarter on both profits and revenues. The company also announced a new CFO, Mark Long who would be in place by 1st September.
JP Morgan Chase (NYSE:JPM) also warned that the bank might have to move thousands of jobs out of the UK in the event the UK lost pass-porting rights into the EU.
On the data front the latest ADP employment report for June showed 172k new jobs added, slightly better than expected, while the May numbers were nudged slightly lower to 168k from 173k, and the April numbers revised down to 149k from 166k. Weekly jobless claims declined again coming in at 254k, well below expectations, and raising expectations of a decent payrolls number tomorrow.
FX
The pound has tried to push above the $1.30 level against the US dollar but on a trade weighted basis still remains above the lows that we saw in 1995 as well as at the end of 2008 at the height of the financial crisis.
The latest manufacturing and industrial production numbers for May came in slightly better than expected, while the April numbers saw some nice upward revisions, helping boost the annualised headline number, painting a slightly more positive picture of the performance of the sector for Q2. As if to reinforce that the latest Q2 GDP estimates from NIESR suggest Q2 growth of 0.6%, though it is quite likely the official numbers could come in well below that.
Demand for UK government debt remained strong as the UK got away £2.25bn of 10 year gilts at a record low yield of 0.9%, and a bid to cover of 2.33, as investors look for prices to rise further in expectation of further interest rate reductions.
Commodities
After a larger than expected draw in API inventory data yesterday crude oil prices have managed to hold onto, and add to their gains however they have continued to struggle with the momentum needed to gain a foothold above the $50 level, with the risk that we could well soon roll over and take out the June lows.
Gold prices have started to slip back a touch as the less frantic tone of the last few days shows some signs of calming down. Despite this the yellow metal is likely to find interest to buy on dips despite today’s calmer tone.
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