Europe
For all the hoopla surrounding the political rowing over the UK’s so called Brexit bill, it’s been a slow session for European markets, drifting back from their recent peaks, ahead of the latest US rate decision, due later this evening, with the CAC 40 in particular treading water ahead of tonight’s final debate between the two candidates Macron and Le Pen, with both looking to land a knockout blow.
Ultimately the election is Macron’s to lose which means that barring a massive faux pas the debate isn’t likely to change much in the days up to the weekend vote.
It’s been a disappointing day for the food retail sector with J Sainsbury PLC (LON:SBRY) feeling the draught after it reported an 8.2% in full year profit, due to a combination of rising costs and a reluctance to raise prices. On the flip side, the acquisition of Argos is starting to reap benefits, with overall group sales increasing 12.7%, while overall costs have come down by £130m.
On the plus side, the supermarket sector had a solid Easter with chocolate sales contributing to a big jump in the size of the grocery market, according to the latest Kantar Worldpanel sales data.
Sales in the 12 weeks leading up to Easter rose for WM Morrison Supermarkets PLC (LON:MRW), Asda, Tesco PLC (LON:TSCO)and Sainsbury’s all improved, along with the Aldi, Lidl and Iceland, highlighting the resilience of the UK consumer, despite an uncertain economic backdrop, though that hasn’t been enough to prevent Morrison and Tesco shares also falling back.
Mining stocks have continued to come under pressure once more as further weakness in commodity prices saw copper drop sharply wiping out the gains of the last 5 days at a stroke, with Antofagasta PLC (LON:ANTO), BHP Billiton PLC (LON:BLT) and Rio Tinto PLC (LON:RIO) all slipping sharply for the second day in succession.
The best performer has been Sage Group PLC (LON:SGE) helping underpin the technology space after the negative reaction to Apple's (NASDAQ:AAPL) results overnight. The company upgraded its revenue guidance after reporting an increase in profits of over 40%.
US
US markets opened lower after investors reacted negatively to last night’s results from Apple. While the company beat profits, revenues came in short and the number of iPhones sold slipped back as buyers held off in anticipation of a new iPhone later this year. The negative reaction appears to be a result of some profit taking, as on the face of it these numbers, while disappointing are still a solid set of figures, with Apple’s services division continuing to add to the bottom and top line, helped by increased revenues from Apple Music. The company also announced an increase in the dividend, so any downside is likely to be limited.
There is also some caution setting in ahead of today’s latest Fed meeting, which is expected to see policy remain unchanged, however markets will be looking closely at the statement for any change in tone, given recent weakness in some of the economic data.
On the data front the latest ADP payrolls report showed that the US economy added 177k new jobs in April, down from the bumper number of 263k seen in March, while the ISM services sector enjoyed a strong rebound in April, driven by strong export orders.
FX
The US dollar has been one of the stronger performers ahead of today’s FOMC rate meeting. Expectations around that statement are for a slightly hawkish tone, but that would be rather counter to recent data which has been on the weaker side.
Despite the political storm raging over the so-called €100bn Brexit bill the pound has held up quite well, with construction PMI for April following in the footsteps of yesterday’s manufacturing number, which was also stronger than expected. The rebound was driven by an upturn in civil engineering and housebuilding with new jobs growing at the fastest pace since May last year.
Traders appear to be interpreting the events of the last 24 hours as the opening salvoes in what is likely to be a long and protracted staking out of positions ahead of the start of talks later this summer.
Sharp slides in commodity prices have weighed on the Australian dollar as well as mining stocks today, as concerns about a slowdown in China prompt a scaling back of expectations around future Chinese demand.
Commodities
Fears about a slowdown in Chinese demand has seen copper prices slip back sharply today wiping out the gains of the last week or so in the process.
These concerns have also been weighing on crude oil prices at a time when US rig counts have continued to rise on a weekly basis. We have seen a bit of a rebound today from six week lows after the latest API data showed a bigger than expected decline in inventories of 4.2m barrels.
Reports that Russia was supportive of extending the production freeze for another six months was also helping, but the picture surrounding the supply glut wasn’t made any clearer with the release of the latest Cushing oil inventories which only showed a decline of 930k barrels, much better than the 3.3m barrel decline that was expected.