Europe
European stock markets are set to finish the day on a positive note as geopolitical sentiment turns positive. President Trump seems eager to take a softer stance in relation to tariffs on imported steel and aluminium, if he can improve the North American Free Trade Agreement (NAFTA) from a US prospective.
North Korea has stated that it is willing to discuss the possibility of de-nuclearisation. The rogue state has several times expressed a similar view, but nothing has yet come to fruition. For now, the very talk of a move is adding to the bullish sentiment.
Just Eat (LON:JE) shares came under pressure after the company posted impressive results, but the weaker-than-expected forecast outweighed its respectable figures. The company said it plans to invest £50 million in the business, to help it stay ahead of its rivals. The earnings guidance for next year was 23% below analysts’ estimates, and given the investment plans it is not surprising it missed expectations. Revenue and gross profit jumped by 45% and 32% respectively, so the business is clearly healthy. Investment will help the company in the long run, even if the share price is hit in the near term. The stock has been in an upward trend for over three years, and if it holds above its 200-day moving average at 725p, its outlook may remain positive.
Smurfit Kappa (LON:SKG) shares are up 20.5% today after the firm revealed it rejected an unsolicited takeover approach from International Paper. According to Smurfit Kappa, the offer failed to reflect the group’s growth prospects. The move has sparked demand for other companies in the packing and paper sector, and the share prices of Mondi (LON:MNDI) and DS Smith (LON:SMDS) are higher on the day.
Intertek Group (LON:ITRK) continue to have a solid performance, having revealed an increase in revenue and profit. The firm has a stellar track-record for capital return and the dividend has been increased again – for the tenth year in a row. The company holds an optimistic outlook for the year too. The share price jolted higher today, and if it retakes the 5,300p area, it could retest the record-high of 5,460p.
US
US stocks are mixed this afternoon as the political mood in the US and abroad has improved. It now seems that Donald Trump is keen to bolster his negotiating position in relation to NAFTA, and it appears that talk about starting a trade war was just a ploy to further his agenda. The relations between North Korea and the US might start to thaw out after the communist regime stated it is open to talking about de-nuclearisation.
US factory orders in January declined by 1.4%, while economists were expecting a drop of 1.3%, while the December report saw an upward revision from 1.7% to 1.8%. We have seen some mixed economic indicators out of the US lately, and this adds to that theme. The non-farm payrolls report last month got the ball rolling about the possibility of four interest rate hikes from the Federal Reserve this year, but a lot has changed since then. Traders will paying close attention to Friday’s jobs report.
FX
The US dollar often benefits when traders take a risk-off approach, but given the news surrounding North Korea, dealers are keen to take on more risk, and the US dollar has suffered as a result. Riskier assets have become more appealing to the investors and the greenback has been dropped.
EUR/USD has been assisted by the slide in the US dollar. Now the dust has settled after the Italian election, traders are pencilling in a quiet period as it will take time for politicians to discuss the possibility of forming a coalition government.
GBP/USD also received a boost from the dip in the US dollar. There were no major economic announcements from the UK today, so the pound has the relatively weaker greenback to thank for its positive performance.
Commodities
Gold jumped to a one-week high on account the slide in the US dollar. The metal has been relatively range bound over the past month, and if it takes out $1,341 it could test the 2018 high of $1,366. The inverse relationship between gold and the US dollar continues to be strong, and the poor US durable goods numbers assisted gold.
WTI and Brent Crude are broadly unchanged on the day as the to-ing and fro-ing between OPEC and US shale producers continues. The cartel of major oil producers are adhering to their coordinated production cut, while US shale producers are taking advantage of the relatively high oil price, and that is why US oil production is at a record high. If WTI and Brent Crude can hold above their February lows, the outlook could remain positive.
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