Europe
European stocks are flying high as the fears of a trade war ease. The US has showed signs that it isn’t as aggressive as traders initially suspected. Beijing won’t be implementing its latest list of tariffs for 60 days, so there is still time for the situation to be diffused. Market volatility is high, and the choppiness is something that traders are getting used to. For the time being, investors are happy to buy into the market, but they are very much aware the sentiment could change quickly.
Sophos
shares are higher today after the company announced they expect their revenue to come in at the higher end of forecasts. The company previously forecasted an increase in revenue of 20% and 22%, and it expects the sales figure to come in at the top end. The company will reveal its full-year figures next month. The stock was jolted higher on the back of the announcement, and if the upward move continues it might target 538p (200-day moving average).
Telecoms companies have shocked the market over how much they are willing to pay for 5G spectrum. Vodafone (LON:VOD), O2, Three and BT-owned EE paid well over what analysts were expecting. In total nearly £1.4 billion was spent by the big players, while the consensus was for a budget in the range of £630 million to £1 billion. Nobody wants to get left behind in the race to keep up with the latest technology. BT and Vodafone (LON:VOD) shares are up 2.2% and 2.8% respectively.
US
US stocks are higher again today as the bullish mood continues. The Trump administration appears to be less hostile than it originally was in relation to the possible trade war with China, and this is keeping equities higher.
The US trade deficit widened for a sixth consecutive month and is now at its largest in over nine years. The trade deficit in February was $57.6 billion, while economists were expecting $56.9 billion. The two largest components of the deficit were China and the EU. This confirms President Trump’s concerns about the trading imbalance between the US and China. That prospect of a trade war is currently being played down by the White House, but fears could flare up again, so traders are likely to remain tetchy.
Initial jobless claims ticked up to 242,000, up from 215,000 last week, and the consensus was for 225,000. The report has slightly taken the shine off yesterday’s strong ADP employment number. Traders will now be focused on the US non-farm payrolls which is due tomorrow. Given the mixed jobs data in the past two sessions, expectations might have been tempered.
FX
EUR/USD is weaker today as Germany and France revealed services which cooled on the month. The services industry is still growing in the two largest economies in the eurozone, but they are growing at a slower pace, and this is additional evidence that the currency area is going through a soft patch.
GBP/USD took a knock after the UK revealed a sizeable slowdown in the growth rate of the services sector. Last month the services PMI reading dropped to 51.7, down from 54.5 in February, and the consensus was for 54. The stark drop in the growth rate took the market by surprise, seeing as many of the major economic indicators have been strong recently. With a softer services sector than expected, the Bank of England might hold off on hiking rates in May.
Commodities
Gold has been hit by the stronger US dollar and the risk-on attitude of investors. The US dollar jumped in the wake of the US trade deficit figures, as tariffs often bring about inflationary pressure. Since dealers are happy to take on more risk today the gold market is feeling extra pain. The US jobs report tomorrow is likely to add volatility to the gold market.
WTI and Brent Crude oil continue to push higher in light of the large drop in US oil stockpiles reported yesterday. The Energy Information Administration reported a decline in both US oil and gasoline stockpiles and that is fuelling the rally. The energy market has been broadly pushing higher since June last year, and the latest inventory figures are adding to the rally.
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