Europe
Stock markets in Europe are weak today as traders are cashing in their chips from last week’s positive run. The lack of any major macro-economic news has prompted dealers to lock-in their profits.
The excitement will pick up at the back end of the week, when UK voters go to the polls, and with the European Central Bank meeting.
The FTSE 100 is still hanging on to the 7500 mark. The London market is being helped by miners like Randgold Resources (LON:RRS) and Fresnillo (LON:FRES), as the underlying gold and silver markets are performing well.
Ryanair (LON:RYA) and EasyJet (LON:EZJ) had solid passenger numbers in May but that wasn’t enough to coax out the buyers. The Irish airline is down 0.8% on the day, and the Luton-based air carrier is now flat after giving up earlier gains. Both stocks have performed well year-to-date, and it appears they are caught up in the general profit taking strategy that investors are employing.
US
The Dow Jones and the S&P 500 are fractionally lower today as traders are squaring up their positions before the former head of the FBI gives his testimony to Congress on Friday.
The potential scandal surrounding Mr Trump was off the radar for a while but now dealers are on tenterhooks as it could come back. The fast sell-off that we witnessed in the middle of last month hasn’t left traders’ minds and they are using this opportunity to bank some of the profits they made at the back end of last month.
US investors will also be keeping an eye on the events in Europe. The outcome of the UK general election is looking more uncertain and the falling CPI rate in the eurozone might give Mario Draghi an excuse to avoid talking about tightening the European Central Bank’s monetary policy.
FX
The US dollar is still weakening as dealers haven’t gotten over the disappointing non-farm payroll figures. This morning the greenback dropped to a level not seen since November against a basket of currencies. The major miss by the May headline number, coupled with the downward revision of April’s number encouraged dealers to drop the dollar. The unemployment rate fell but traders were more concerned by the unchanged wage growth figures.
There was some positive news for the US dollar today, as the number of job openings for the month came in at 6.04 million, which was well above the 5.65 million anticipated.
The political uncertainty surrounding Donald Trump may flare up again on Friday, when the previous head of the FBI, James Comey, will be testifying before Congress.
The GBP/USD has been pushing higher over the past 10 days but the $1.30 hurdle is still some way off. The pound has been making up for lost ground ahead of the UK general election on Thursday.
Sterling was looking stronger a few weeks back when the polls were pointing to a Conservative majority but now that Labour are closing in, we have seen some pressure on the pound.
Commodities
Gold has traded above $1290, a level not seen since April as traders are seeking the safe haven asset.
Equity markets had a good run last week, and with the European Central Bank meeting, the UK general election and a testimony from the former head of the FBI James Comey at the back end of this week dealers aren’t taking any chances.
Traders are mindful of the underwhelming jobs report from the US last week also. At the beginning of 2017, investors were speculating there would be several interest rate hikes by the Federal Reserve. There was a rate hike in April, the fed funds futures markets is pricing in a 90% chance of another hike this month, but beyond that, dealers are unsure if there will be further tightening.
WTI and Brent Crude Oil are both in the downward trend that they have been in since the OPEC meeting which took place on the 25th of May. Even though the political upheaval in the Middle East in relation to Qatar is concerning, oil traders aren’t paying much attention to it as the country is a major player in liquefied natural gas (LNG) rather than oil.
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