Europe
European stocks were strong going into the European Central Bank (ECB) meeting and press conference, and they are still holding up well after it, even though we have seen a small pullback in the DAX and CAC 40.
Mario Draghi, the European Central Bank chief, has put off any plans to alter the bond buying scheme until at least the October meeting. The outlook for the region is still steady as she goes. The growth forecast for this year was revised higher, and the predictions for the following two years remained unchanged.
Shares in Bovis Homes (LON:BVS) are up 9.7% today after the company revealed restructuring plans in today’s first–half update. To tackle a recent soft patch the homebuilder is going through, the company is planning on cutting building costs, lowering the headcount and focusing on a few core regions. These fresh plans overshadowed the drop in profits and the decline in completions. The share price gapped higher today and went on to hit its highest level since August 2015.
Direct Line (LON:DLGD) welcomed the UK government suggestion that it would change the Ogden rate – which would mean that insurers may play out smaller compensation claims. The rate is currently -0.75%, and I might be moved to between 0% and 1%. This would lead to a reduction in the amount paid out in injury claims, and in turn, lower insurance premiums. Shares in Direct Line are up 1.9% on the back of the announcement.
US
The Dow Jones and S&P 500 are offside today as profit taking from last night’s positive moves sets in. The decision by Donald Trump to strike a deal with the Democrats to grant a three month extension to the debt ceiling along with funding for the clean-up costs of the tropical storm Harvey, boosted investor confidence yesterday.
The issues of the debt ceiling will be back on the agenda in December, and even though some say the US President is just kicking the can down the road, it gives investors and victims of storm Harvey relief.
The latest jobless figures in the US saw the effects of the tropical storm, as the rate jumped by 62,000 to 298,000, and the consensus was for an increase of only 5000.
The surprise resignation of Stanley Fischer from the Federal Reserve yesterday, is leading traders to believe the US central bank is less likely to hike rates in December, and the soft US dollar is helping some US stocks, but the banks are being dragged lower.
FX
The GBP/USD was helped by the better than expected Halifax survey of UK house prices. In August, UK house prices rose by 1.1%, and the consensus was for an increase of 0.2%, and the July reading was revised from 0.4% to 0.7%. The broad decline in the US dollar has helped the pound make up for lost ground from August.
The EUR/USD traded north of $1.20 today on the back of the ECB update. Mario Draghi, the President of the ECB stated the ‘bulk’ of the decisions in relation to the stimulus package will be made next month. There has been a lot of speculation the ECB will trim the bond buying scheme, and the fact that Mr Draghi deferred the decision until next month tells us he wants to keep the currency weak. The ECB lowered its inflation forecast for 2018 and 2019, but it wasn’t enough to keep the euro down.
Commodities
Gold hit yet another one year high as the jump in US jobless claims pushed the metal higher. Jobless claims jumped to 298,000, while the market was expecting an increase to 241,000, from 236,000 last week. Tropical storm Harvey was blamed for the spike in jobless claims. While gold keeps hitting new one-year highs, the bullish sentiment surrounding the asset could well continue.
The divergence between Brent Crude oil and West Texas Intermediate (WT) continue as the former is higher on the day, and the latter is marginally lower on the day. Hurricane Irma may cause disruption to the energy market for the next few days, and volatility is expected to be high.
US oil inventories jumped by 4.58 million barrels, according to the energy information agency (EIA), and that was broadly in line with market expectations. Gasoline stocks dropped by 3.19 million barrels, and dealers were expecting a drop of 5.65 million barrels.
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