Europe
With little data to work off, European markets were largely following through on Friday’s late recovery from the huge sell-off sparked by a clash between Ukrainian and Russian military forces. A planned meeting between Russia and Ukraine mediated by France and Germany has fuelled the perception that the stand-off between the two countries can be diffused.
According to Rightmove, UK house asking prices dropped for a third month by a record 2.9%. The extent of the drop will be mostly seasonal as the more discretionary high-end sellers typically skip the summer to wait for higher prices in autumn. With different reports conflicting over the direction of UK prices, we will likely have to wait until figures from September to get a true sense of whether this is the top in house prices or just a pause.
The FTSE 100 gapped higher on the open to re-test Friday’s high at 6,743. The UK’s benchmark’s two tech stocks ARM Holdings (LONDON:ARM) and Sage Group (LONDON:SGE) led while the utilities sector was performing poorly only edging out small gains dragged down by Severn Trent (LONDON:SVT) and Scottish & Southern Energy (LONDON:SSE).
Bovis Homes (LONDON:BVS) was a top riser on the FTSE 250 after hiking its dividend by 200% following a 166% jump in profits for the first half of the year.
US
As tensions ease abroad, domestic social cohesion is breaking down in Ferguson, Missouri with the National Guard having been called in to support what has officially become a state of emergency with police fighting demonstrators with tear gas.
US stocks are unperturbed by the worsening situation in Ferguson and are taking direction from an easing of tensions in Ukraine as well as an M&A bidding war amongst the top three US dollar stores.
Dollar General (NYSE:DG) has joined the fray with an all-cash bid of $78.50 per share for Family Dollar Stores Inc (NYSE:FDO), bigger than the $74.50 cash and stock bid from Dollar Tree Inc (NASDAQ:DLTR). Activist investor Carl Icahn bought into Family Dollar suggesting a takeover is necessary before the first bid was made.
FX
The US Dollar was mostly stronger today ahead of consumer price inflation data tomorrow which is expected to show a slight rise in core prices.
Russia widened its trading band for its currency the ruble today as part of a strategic move away from a managed rate and towards free-floating currency system. The move is risky given that the Bank of Russia has been forced to intervene just recently to stem declines following Russia’s annexation of Crimea.
The purpose of widening the bands is to make the ruble a more reliable trading currency which can one day be used instead of the US dollar for Russia’s energy exports.
The British pound was gaining against the euro and Swiss franc today following comments from Bank of England Governor Carney over the weekend that the Bank would not need to see an actual pickup in wages before hiking rates. The comments seemingly oppose the emphasis on the importance of wage growth from last week’s inflation report.
If wages are now not perceived to be as important, then tomorrow’s UK CPI data will take on extra significance as a contributory piece of data towards when the BOE will raise rates; a move to 2% could see the British pound skyrocket.
Commodities
Crude Oil was having another day of heavy losses after a slight respite from recent declines on Friday. With geopolitical tensions failing to have any material impact on production; oil prices are now falling through the floor as a fragile global recovery isn’t providing enough demand to match the increase in supply mainly at the hands of production in the US.
Gold is lower today; moving in the opposite direction to stocks as markets trade in a more risk-on manner. The precious metal has been oscillating $20 either side of $1,300 for the last month.
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