Europe
The FTSE 100 had a rollercoaster ride today as it started out in the red due to the powerful pound, then quickly swung into positive territory due to the softer than anticipated inflation data. The gains did not last as the heavy-weight sectors like banking and mining turned south, pulling the equity benchmark with it.
British banks like Barclays (LON:BARC) are lower due to the disappointing trading figures from Goldman Sachs (NYSE:GS). The US bank posted revenue from trading activities that were well below analysts’ estimates and the knock-on effect was felt over here.
Rio Tinto (LON:RIO) cut its own full-year guidance for iron ore shipments. In the second-quarter, iron ore shipments dipped by 6% due to rail maintenance work, and that impacted the outlook for the remainder of the year. The wider mining sector like BHP Billiton (LON:BLT), Glencore (LON:GLEN) and Anglo American (LON:AAL) were dragged lower too.
Carillion (LON:CLLN) shares have had another solid day after the company was awarded two contracts worth a combined £158 million. It’s the second day in a row that Carillion had a stellar performance.
The DAX and the CAC 40 are being hit hard by the strength of the single currency. The surge in the euro has sent equity markets in the eurozone tumbling.
US
US equity markets turned lower after today after Bank of America (NYSE:BAC) and Goldman Sachs (NYSE:GS) reported their second-quarter numbers. The earnings updates combined with the failure of Donald Trump to get his healthcare reforms passed gave investors the perfect excuse to cash in their positions after a very positive run recently
Goldman’s revealed a 40% drop in their revenue from fixed income, currencies and commodities (FICC), and it came in below analysts’ expectations. This was the number the sparked the selling of the stock, and the sector as a whole. The decline in market volatility was cited as a reason behind the drop, also their clients are taking on less risk and in turn volumes are down too. Revenue at Goldman’s bond division decline by 40%, something that has investors really worried.
FX
The EUR/USD traded at its highest level since May 2016 as the greenback sank – just like Donald Trump’s hopes to reform healthcare. The US President failed to get enough support from fellow Republicans in order to bring in the healthcare reforms he wanted, and it dented the dollar as it makes him look weak. Speculators had high hopes for Trumps plans in relation to his pro-business policies, but now they are questioning if he can even get them implemented.
German ZEW business confidence slipped in July to 17.5, from 18.6, but currency traders shrugged it off.
The GBP/USD traded north of $1.31 this morning as the US dollar was getting hit, but it fortunes turned around when the UK revealed inflation for June that came in at 2.6%, and the market expected it to hold steady at 2.9%. The pound was severely hit on the back of it as traders were quick to exit their long positions. The pound has been gaining ground against the US dollar throughout 2017 so the outlook still looks positive for sterling.
Commodities
Gold is taking full advantage if the weakness in the US dollar. The upward move in the metal is also been drive by the poor performance of global equity markets. The safe haven asset it trading at its highest level in over two weeks and the bullish move gathers momentum. Traders are doubtful if the Federal Reserve will increase interest rates this year again, in light of the inflation data from the US on Friday. If the perception that US interest rates will remain unchanged this year, gold could see even higher demand.
Brent crude oil and WTI have risen as the softer greenback made the energy more attractive. Last week Saudi Arabia stated it was contemplating reducing its oil exports in August, and this is playing on traders’ minds. The fundamentals of the oil market haven’t changed a whole lot recently but the better-than-expected growth from China points to higher demand for the commodity.
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