Europe
Stocks in Europe are offside today as investors are still a bit wary about the large drop in oil over the past couple of weeks. The last two trading sessions have been a reminder of late 2015 and the beginning of 2016, when the collapse in the oil price sparked fears about global growth. Investors are worried a depressed oil price could bring about a period of prolonged low inflation, which would have negative implications for growth.
The FTSE 100 is currently at the high of the day, but is firmly in the red. From a trading point of view, the Queen's Speech didn’t have a whole lot to offer, but the hawkish comments from Andy Haldane, of the Bank of England, helped the market move higher.
Berkeley Group (LON:BKGH) shares are back above £33 after the home builder announced a 53% rise in annual pre-tax profits. The company is all too aware of the uncertainty that exists in the housing market, and especially in London, but the business already has a strong order book.
Provident Financial (LON:PFG) took a pounding today after the company issued a profit warning. The sub-prime lender has seen a drop off in debt collection and sales to existing customers, which is a dangerous mix.
US
The Dow Jones and the S&P 500 are broadly unchanged on the session. It would appear that US equities are immune to the oil lead sell-off in stocks. The two main US equity benchmarks were recently at record highs, and the Federal Reserve is bullish in the outlook for the economy, and for that reason dealers are content to hang on to their positions.
US existing home sales in May came in at 5.62 million and that exceeded the market estimates of 5.55 million. It was also up on the April’s figure of 5.57 million. The news was a nice change, as we have had some disappointing housing figures from the US recently.
Caterpillar (NYSE:CAT) is down 0.9% today as the stock is closely connected to the mining sector, and since mineral extractors have been falling since February, it hardly comes as a shock that Caterpillar is in the red.
FX
The GBP/USD bounded back after Andy Haldane, of the Bank of England, stated that interest rates may have to rise later this year. Mr Haldane was one of the five Bank of England members who voted to keep rates on hold last week, he doesn’t want to keep rates at current levels forever. The central banker believes there is a risk of tightening monetary policy too early and too late, and he feels that towards the end of the year would be the right time. The pound was at its lowest level versus the US dollar since April this morning, but Mr Haldane’s comments squeezed the sellers and brought in some buyers.
The EUR/USD is creeping higher today but volatility is low as there were no major economic announcements out of the eurozone. The single currency has been in decline versus the US dollar since the start of the month. The hawkish stance from the Federal Reserve, and members like William Dudley, pushed the US dollar higher against a broad basket of currencies. Traders of the euro are looking ahead to Friday, when France, Germany and the eurozone will release the flash manufacturing and services PMI reports.
Commodities
Gold has fallen to its lowest level in over one month as the strong US dollar is prompting traders to sell the metal. Gold is also deemed to be a safe haven asset, and while some equity markets have just pulled back from record highs, there isn’t major demand for gold at the moment. The Federal Reserve is keen to press ahead with its plans to tighten monetary policy, and while that is its stance, we could see further losses for gold.
WTI and Brent crude oil initially jolted higher after the Energy Information Agency (EIA) revealed a 2.45 million barrel decline in oil inventories, and the market was expecting a 2.5 million barrel drop. Within a few minutes of the announcement, oil started to give back some of the gains it made because of the spike higher. Concerns about over-supply will hang over the oil market, and the dwindling demand from Asia is playing on traders’ minds too. Earlier today, Iran said OPEC should consider a deeper cut to the reduction in production, but as we have seen, they do not always work.
Disclaimer: CMC Markets is an execution-only service 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.