Europe
Multiple Eurozone officials offering no hope of a resolution for Greece at the next meeting of finance ministers hit sentiment in European stocks on Monday. Another rate cut over the weekend in China was a boost to domestic markets but the affect was more muted in Europe which pulled back after finishing last week strongly.
The Bank of England MPC left policy unchanged at its May meeting, keeping interest rates at 0.5% and its asset purchase facility untouched. The apparent bottoming of oil prices could have given the two dissenters, Martin Weale and Ian McCafferty confidence to vote for a rate hike on the prospect of a speedier move back towards the 2% inflation target. The votes won’t be known for a couple of weeks but chances are that it was another 9-0 in favour of keeping rates on hold until CPI and wage growth show sustained gains.
The rate cut in China allowed UK-listed mining companies to pull the FTSE 100 higher in early trading but a slide in gilts prompted concerns that government bond yields across the world were about to take off again.
Out of all the Election Day gainers, most including banks and property companies were able to continue rising but utility companies gave back a little with some profit-taking following massive gains in the typically more sedate sector.
Royal Mail (LONDON:RMG) shares were top gainers after competitor Whistl, formerly known as TNT, suspended its door to door letters service, leaving the former government monopoly with its dominant position in the market.
TUI Travel shares gained after the company announced plans to rebrand away from Thomas Cook, First Choice and other international brands with the idea of putting it all under one roof. TUI is a pretty bland name without anything close to the history or branding power built-up by the likes of Thomas Cook so the move is not without risks. Just for the sakes of harmonisation, TUI is putting themselves back in the running against every other unknown internet travel outfit.
US
It was a pretty slow start to the week for US stock markets which opened slightly higher, still digesting the implications of last week’s unemployment report while buoyed by looser monetary policy in China.
The April US jobs report on Friday indicated a modest bounce back that eased both economic growth and rate-hike fears and helped stocks move higher. The lack of earnings or economic data on Monday left stocks hovering around the highs achieved after the jobs report.
FX
The US dollar was mostly higher on Monday as oil traded lower.
The post-election feel-good factor was still evident in the British pound which was one of the sole outperformers versus the US dollar on Monday, even after the fully expected unchanged decision from the Bank of England to keep rates on hold. The central bank’s inflation report on Wednesday could see some higher revisions to inflation given the basing in oil prices and support the idea of a rate-hike sooner than currently priced in.
The Kiwi dollar tanked over 1.5% as speculation builds over a rate cut from the RBNZ following the recent move by the RBA to do the same.
Commodities
Gold and silver were slightly firmer on Monday on news of more global monetary easing while copper seems to have moved higher ahead of the PBOC announcement and slipped back to $2.90 per lb on the news.
The Brent crude oil recovery has lost some steam following the news that US shale drillers are looking to come back online. Weekly production has only just slowed for the first time in four months but the $60 per barrel price tag for WTI, a level some have cited as the break-even price for some US shale drillers could prompt US drillers to come back to their rigs.
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