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Stocks Slide As Profit-Taking Sets In

Published 03/05/2018, 16:35
Updated 03/08/2021, 16:15

Europe

European equity markets are lower today as weakened global sentiment encouraged profit-taking. Some major European indices hit their highest levels since February yesterday, and investors are now locking in some profits. Traders took their cues from Asia overnight and decided to exit the equity markets, partially driven by higher yields on government bonds.

Smith & Nephew (LON:SN) shares are in the red after the company lowered its full-year guidance. First-quarter revenues weren’t too hot, and the company reduced the forecast from a range of between 3-4% to 2-3%, and this has weighed on investor sentiment. Smith & Nephew stated that profit margins were unchanged, and that it would not achieve its end-of-year target. CEO Olivier Bohuon described the performance as ‘mixed’, and this weighed on investor sentiment. The stock is in the red today, but it did rally over 16% between February and early May.

JP Morgan raised its outlook for Just Eat (LON:JE) shares to 775p, up from 656p. It is not the only bank this week to up its target for the company, after Berenberg boosted its target price for Just East to 880p from 840p yesterday. It is likely the upgrades were on account of the strong first-quarter figures on Monday, where Just Eat issued stellar sales numbers and a positive outlook. Shares in Just Eat are down 0.3% at 795p.

US

US stock markets are in the red today as traders are feeling a little less bullish after the Federal Reserve meeting last night. The US central bank failed to deliver the upbeat outlook the market was expecting, and stocks are lower as a result. The Fed might still hike interest rates three more times this year, but at the moment some investors are unconvinced.

Tesla (NASDAQ:TSLA) shares are in the red after the company posted a narrower-than-expected loss last night, but the unusual press conference by CEO, Elon Musk, left investors unimpressed. The company posted a loss per share of $3.35, compared with the expectation for a loss of $3.58 last year. Revenue jumped to $3.41 billion, while analysts were expecting $3.22 billion. Mr Musk called some of the questions by equity analysts ‘boring’. The car maker is under pressure in terms of production, and Mr Musk’s dismissive attitude has dented the company’s reputation.

FX

The greenback is in the red today after the Federal Reserve delivered a less-than-hawkish update last night. The greenback had a good run this week in an anticipation of the Fed being bullish on the US economy, but when a more neutral update was revealed, traders took their profits. The central bank seems to be more confident the inflation target will be hit, but its outlook for the economy wasn’t as bullish.

EUR/USD is being assisted by the weaker US dollar. The single currency took a short-lived hit after the eurozone released disappointing inflation figures. In April, eurozone CPI slipped to 1.2%, down from 1.4% in March, while economists were expecting 1.3%. The dip in the cost of living could keep the European Central Bank’s monetary policy on the loose side.

GBP/USD is also benefiting from the slide in the greenback. The UK services sector ticked up in April, as the reading came in at 52.8. In March the reading was 51.7 – its lowest since July 2016. The services sector accounts for approximately 75% of British output, and these figures point to an industry that is growing at a slow rate.

Commodities

Gold has bounced back today in the wake of the Fed meeting last night. The update left traders wondering will there be two or three more interest rate hikes this year. The Fed were not as hawkish as the market was expecting and that triggered a sell-off in the US dollar, and in turn gold became more attractive. The metal held above the important $1,300 mark, and it is remains in the same old range of $1,300-$1,350.

WTI and Brent Crude haven’t moved much since yesterday when US oil and gas stockpiles surged. The energy market has seen relatively low volatility today. The concerns that President Trump will impose sanctions on Iran are still dong the rounds. Mr Trump will be making his decision on 12 May, and until then, traders are likely to be nervous.

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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.

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