Europe
The recovery in European equity markets is still being played out. Investors are becoming more content to buy back into the market, and the memory of the sharp sell-off at the start of the month is continuing to fade. Dealers are coming around to the idea that the positive market momentum is here to stay.
Provident Financial (LON:PFG) shares are in the red after it was reported the company is considering launching a rights-issue in order to raise £500 million. Additional financing could strengthen the company’s balance sheet, and assist it with the fines that it has been levied with. The lender has had a rough ride recently, revealing two profit-warnings last year, and the share price hasn’t recovered. The share price has dropped 10.2% today and if it falls below the August low of 541p, it could target 500p.
Hammerson (LON:HMSO) had a good set of results today, but it wasn’t enough to entice investors. The real-estate investment trust (REIT) posted a 28% jump in pre-tax profits. Demand for property is clearly high as occupancy levels edged up to 98.3% – an all-time high. Rental income rose by 6.9%, which also points to high demand. The retail industry has changed in recent years with the rise of online shopping, and this has impacted the commercial property sector across the board. Hammerson’s share price has been in decline since 2015, and if the decline continues it could fall to 430p.
US
American stocks are leading the way. The rapid sell-off that we saw at the start of the month begun in the US, and it is also the country that has recovered the most. The Dow Jones and S&P 500 are comfortably above their respective 50-day moving averages, while the Nasdaq 100 isn’t a million miles away from its record highs.
US new home sales fell by 7.8% in January, while economists were expecting an increase of 3.8%. The December report showed a 9.3% fall in new home sales. A large single-digit drop two months in a row is a little concerning. It is possible the jump in interest rates was behind the move, or perhaps the cold weather was to blame.
FX
The US dollar continues to be volatile. The greenback started off the session well and truly in the red, but it has now swung around. The Federal Reserve hiked interest rates three times last year and traders think we could be in for another three, or perhaps four rate hikes this year. The erratic moves in the US are likely to continue while traders remain divided over how many hikes the Fed might implement.
GBP/USD has been dragged around by the US dollar. UK mortgage lending rose for the first time in four months. Mortgage approvals ticked up to 40,117 in January, up from 36,085 in December. Consumer lending fell though, which sends mixed signals. The US dollar continues to be the dominant mover on the currency markets.
EUR/USD is largely unchanged on the day. Mario Draghi, president of the European Central Bank (ECB), stated inflation in the currency bloc is still conditional on the stimulus programme. Mr Draghi has a track record of leaving the door open to additional monetary easing, and it sounds like he hasn’t changed his ways.
Commodities
Gold is still in positive territory but it has drifted lower as the US dollar recouped it earlier losses. As we approach the March Federal Reserve meeting, we could see gold come under pressure as traders are fearful on a rate hike from the Fed.
WTI and Brent Crude hit levels not seen since the first week in March overnight, after Saudi Arabia stated that output for the first three months of 2018 would be below the agreed 2016 production level. The oil producing nation is clearly keen to curtail output in order to boost prices.
According to Baker Hughes, the number of active rigs ticked up to 799, from 798 the previous week. The relatively high oil price has prompted shale producers to ramp up to their activity.
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