Europe
The FTSE 100 is suffering on account of the rally in the pound. Sterling has gained considerable ground against the US dollar and euro, and the British equity benchmark is paying the price for it.
Sage Group (LON:SGE) shares came under pressure as traders took their profits. The company stated it is ‘on track’ to achieve its full year results as it had a good start to the year. First-quarter sales increased by 6.3%, and that was helped along by 7% organic growth. The stock hit an al-time high yesterday, but gapped lower today and is down 7%. The share price has been pushing higher since 2009, and the weakness today may trigger fresh buying.
JD Weatherspoon’s (LON:JDW) stated that revenue for the 12 weeks until mid-January jumped by 6%, and now the company is ‘slightly’ ahead of its targets for the year. The pub chain also stated that even though the financial year has gotten off to a good start it may not be able to match the stellar sales that were reordered in the second-half of last year. The stock reached an all-time high today, and if the positive momentum continues it could target 1400p.
Shares in Ashmore (LON:ASHM) continue to be in demand, as the company posted strong figures last week. The robust earnings update prompted a number of investment banks to boost their share price target since the figures were released.
Fresnillo (LON:FRES) and Randgold Resources (LON:RRS) are some of the biggest gainers in London today due to the rally in the gold and silver. The soft US dollar is propping up the bullion market.
US
US markets are still in bullish mode and we have seen fresh record highs on the Dow Jones, S&P 500 and Nasdaq 100. The positive upward momentum in American markets has now been given an extra boost by the weakening of the US dollar.
Some investors have been concerned about the high valuation of US equities lately, but now they have become relatively cheaper for international investors due to the major drop in the US dollar basket.
US existing home sales fell by 3.6% in December and economists were only expecting a dip of 2.2%. The announcement didn’t help the US dollar, which in turn kept US equities firm. In November, US existing home sales were at its highest level since 2010, so a slight cooling of the market is nothing to be frightened by.
FX
The US dollar is taking a pounding, and the dollar bears are piggy backing on comments from Steven Mnuchin, the US Treasury Secretary, who stated the weak currency is good for US trade. The statement gave the impression Mr Mnuchin wouldn’t stand in the way of a declining US dollar.
GBP/USD traded north of the 1.4200 mark – creating yet another new 19 month high. The pound has been helped by the slide in the greenback, but firm wage data from the UK played a role too. On a monthly basis, UK average earnings jumped by 2.4%, an increase on the 2.3% growth rate in October.
EUR/USD breeched the 1.2400 mark as the single currency was also propelled higher by the drop-off in the dollar. The euro has notched up another three-year high against the US dollar today. The German services data jolted the euro higher too, as the industry reached a highest since 2011.
Commodities
Gold has hit a new four-month high as the severe sell-off in the US dollar has lifted the bullion market. Gold continued its upward move that begun in mid-December and if the metal clears the September high of 1358, it could pave the way for a rally to 1375.
WTI and Brent Crude ticked up in the wake of the energy information administration (EIA) report, which showed a smaller decline than anticipated in US oil inventories. Oil stockpiles in America fell by 1.07 million barrels, while traders were anticipating a drop of 1.95 million barrels. The announcement follows the report from the American Petroleum Institute (API) yesterday which showed an unexpected build on oil inventories.
WTI traded above 65.00 for the first time since late 2014 today as the oil market pushed higher after the EIA report.
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