Europe
Today’s weakness in the pound has helped push both the FTSE100 and FTSE250 to new record highs pushing the FTSE250 above 20,000, while the FTSE100 has made further progress above 7,520.
On the flip side of the coin, broader European markets have continued to struggle despite economic data which to all intents and purposes points to a continued improvement in economic activity across the whole of Europe.
The overnight slide in oil prices doesn’t appear to have hurt oil and gas stocks too much with oil prices stabilising at one week lows, keeping BP (LON:BP) and Royal Dutch Shell (LON:RDSa) in positive territory.
Earlier this week Barclays (LON:BARC) published a note that suggested that domestically focussed UK stocks were unjustifiably undervalued despite concerns about squeezed consumer spending, and that over the course of the next few months rising wages and peaking inflation could well see a rebound. As if to reinforce that narrative Frankie and Benny’s owner Restaurant Group shares jumped sharply after reporting first quarter numbers that beat expectations, resulting in an upgrade from JPMorgan (NYSE:JPM).
Bank shares have underperformed with Royal Bank of Scotland (LON:RBS) leading the decliners with a hard core of shareholders apparently determined to have their day in court and put ex-CEO Fred Goodwin on the stand to get an insight on what went on with respect to the controversial rights issue just before the bank was bailed out.
US
US markets have opened slightly lower after yesterday’s record highs as some profit taking kicks in ahead of the long bank holiday weekend.
The latest US Q1 GDP revision showed a sharp revision higher to 1.2% from 0.7%, though this revision is only back to what was expected before the first print, earlier this month. The adjustment higher was mostly down to a rise in personal consumption from 0.3% to 0.6%.
Durable goods for April were weaker than expected when stripping out transports, declining 0.4% against an expectation of a rise of 0.4%
On the earnings front US homeware retailer Big Lots (NYSE:BIG) posted a better than expected performance in its first quarter, with profits coming in at $1.15c a share, well above the $0.99c a share, though revenues were down slightly.
Also on the retail front Costco (NASDAQ:COST) also beat expectations for Q1 posting profits of $1.40c a share, with revenues also beating expectations.
FX
It’s not been a good week for Prime Minister Theresa May, already under pressure earlier this week as a result of a shambolic manifesto U-turn. An opinion poll released overnight showed that the Conservative lead over Labour has been cut to five points, sending the pound sharply lower.
With the pound already under pressure due to weaker than expected economic data, this surprise poll has acted as an additional catalyst in pushing the pound to a two month low against the euro and its lowest level this month against the US dollar.
Having started the campaign on a “strong and stable” footing, recent policy missteps by Mrs May have seen the election campaign take on the look of an “ugly contest” of mediocre candidates, and that appears to be being reflected in the recent performance of the pound.
The New Zealand dollar has been the stand out performer today rebounding from yesterday’s losses and looks set to finish the week on a high in a week that has seen the “kiwi” get a boost from a positive reaction to the recent budget and rising milk prices.
Commodities
Gold prices have continued to have an overall bid tone. Despite record highs in US equity markets there still appears to be an appetite for some hedging into the precious metal, which appears to be happening in preference to hedging exposure by way of the VIX.
After yesterday’s sharp falls, oil prices are stabilising a little as we head into the weekend. OPEC members have insisted that the deal reached yesterday will rebalance the market, while Russia’s oil minister Novak said there was scope to do more if needed.
The key question remains about US shale with US rig counts already over 35% up from where they were at the end of last year and US inventories also higher, there is a high degree of scepticism that the cuts as announced will be particularly effective.
DISCLAIMER: CMC Markets is an execution only 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.