Europe
European stocks were rocked by the shocking event that took place in Barcelona yesterday. Equity markets in Europe have been in decline for a few months, and now the added fear in relation to security in the Continent is gripping the markets. The announcement that US President Donald Trump dissolved a number of his councils has also added to the bearish sentiment.
The tragic event in Barcelona yesterday have shook tourist-related stocks. When events like this happen, traders wonder will there be a negative impact on tourism, and companies in the travel and leisure sector feel the pressure. InterContinental Hotels Group PLC (LON:IHG), International Consolidated Airlines Group (LON:ICAG), easyJet (LON:EZJ) and Ryanair Holdings PLC (LON:RYA) are all in the red today, but we have seen somewhat of a recovery since this morning.
CRH (LON:CRH) and Ashtead (LON:AHT) are listed in London, but both companies have high revenue streams from the US, and Donald Trump’s decision to disband the advisory council on infrastructure has put a dent in their share prices. Both stocks were given a boost by the election of Trump as he pledged to ramp up spending on infrastructure, but now traders are getting out of their positions on the back of recent developments.
Babcock International Group PLC (LON:BAB) shares were pushed lower today after Credit Suisse (SIX:CSGN) cut their price target to 925p from 1030p. The share price dropped to its lowest level in 14 months today, and the share price has been in a downward trend since early 2014, and we haven’t seen any signs of a turnaround so far.
US
US stocks continue to slide as political uncertainty is still grinding down investor confidence. The Trump administration is looking weaker by the day, and as the President hasn’t even begun to ‘make America great again’ investors are losing their patience with him.
The pro-business policies that helped Mr Trump land the top job are nowhere near from being implemented, and at the rate he is going they won’t be. Traders are viewing his decision to disband councils as a sign to cut and run from the stock market. It isn’t just big names in the business world that are walking away from Mr Trump, it is investors too.
On the bright side, the preliminary University of Michigan consumer sentiment survey ticked up to 94 in August from 93.4.
FX
The EUR/USD is a touch higher today as short covering kicks in. The single currency lost ground to the US dollar in the last two days and now we are seeing a small bounce back. Some of the shine has been taken off of the euro after it was revealed that European Central Bank President, Mario Draghi, will not be talking about trimming the bond buying programme in Jackson Hole later this month. The euro was pumped up in anticipation of Mr Draghi discussing tapering, and now dealers have less of a reason for being long the euro.
The GBP/USD spiked higher in the morning but is now largely unchanged on the day. There were no major economic announcements from the UK today, and the higher than expected University of Michigan consumer confidence survey gave a small boost to the pound. Sterling has dropped over the past two weeks but it appears to be receiving support from the 100-day moving average at $1.2870.
Commodities
Gold traded above $1300, this is highest level it has been since November 2016. The decline in global equities has helped the demand for gold as it is deemed to be a safe haven asset. On risk-off days is it not surprising to see funds flow out of stocks and into gold. The dip in the US dollar today also helped the metal. It is interesting that gold took out the June high of $1296, because this could be the start of a leg higher. After all, traders are not worried about an interest rate hike from the Fed in the next few months.
WTI and Brent Crude oil are largely unchanged today. Traders will be looking ahead to the Baker Hughes active rig count report at 6pm, keep in mind last week’s number was 768. The same old fear about over-supply is still hanging over the energy market, as this week we saw US oil production jump to a two-year high and gasoline stockpiles were way above market expectations.
"DISCLAIMER: CMC Markets is an execution only 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. "