Europe
The FTSE 100 suffered a severe sell-off due to the rally in the pound. The strength of the sterling is wreaking havoc on the London market. The FTSE 100 dropped to its lowest level since late April, as the pound went from strength to strength.
The surge in sterling was triggered by hawkish comments from Gertjan Vlieghe of the Bank of England (BoE). Mr Vlieghe announced that interest rates might be rising in the coming months.
The rest of Europe was been quiet in comparison with the London market. Even though North Korea fired a missile over Japan, traders shrugged it off.
Eurozone equity markets are broadly lower on the day as the retreat in stocks that started on Wednesday continues. There bullish sentiment that existed at the beginning of the week has now been replaced with sideways trading.
Carnival (LON:CCL) shares were hit by a broker downgrade from Credit Suisse (SIX:CSGN) due to its large exposure to the Caribbean. In the wake of Hurricane Irma, the travel company will find it tougher to sell cruises in the region.
Wetherspoons (LON:JDW) posted a 16% jump in pre-tax profits for the 53 weeks until early July. Since the start of the new trading year the like-for-likes sales have been up 6.1%, but the company stated the strong start to this year is unlikely to continue. Even though the company expects the growth rate of sales to cool, it expects to achieve its full-year target. The share price is up 11.3% today and hit a fresh all-time high.
Next’s (LON:NXT) shares are up 0.9% after a number of banks raised their price target for the stock. The wave up upgrades come after the fashion house raised its full-year guidance for sales and profits yesterday. The clothing company was hit by the weak pound over the past 15 months, but after today’s move in sterling, it may receive a boost.
US
The Dow Jones reached yet another new all-time high in early trading, and the S&P 500 and Nasdaq 100 are both close to their respective record highs. The very mention of record-highs is likely to keep traders in a positive mind-set, so we could see the other two indices play catch up with the Dow.
The US announced some disappointing economic data, and since that pushes back the prospect of another interest rate hike from the Federal Reserve this year, it is keeping the sentiment bullish.
Retail sales grew fell by 0.2% on a month-on-month basis, while economists were anticipating an increase of 0.1%. The core figure saw a 0.2% increase, but economists were expecting an increase of 0.5%. These figures tell us the American consumer isn’t overly keen on spending money, and with wage growth being mediocre and inflation ticking up, you can see why.
FX
It has been a stellar day for the GBP/USD after Gertjan Vlieghe from the BoE said it might be appropriate for a rate hike in the next few months. The announcement came one day after the UK central issued hawkish commentary – which caught some traders by surprise. The pound traded above the $1.36 mark – as level not seen since the EU referendum.
The EUR/USD has helped along by the softer than expected US data today seeing as there was no major economic announcements from the eurozone. In August, US retail sales fell by 0.2%, while the market was expecting a 0.1% increase. To make matters worse, the July figure was revised lower to 0.3% from 0.6%. The New York Fed manufacturing survey and the industrial report both came in under expectations too.
Commodities
Gold is lower on the day despite a broadly sell-off in equities and the US dollar. This day last week gold hit a 13-month high, and we have seen a pullback in price since. The wider upward trend is still in place, and while it is above $1300 the outlook could remain positive.
Brent Crude oil and WTI are still enjoying their rally from the beginning of the week, as concerns about falling supply and a pickup in demand still do the rounds. Saudi Arabia are talking about extending the production cut by three months until the end of June 2018.
Iraq is a major oil producer, and the oil rich region of Kurdistan plans to hold an independence referendum. Traders fear the vote could trigger political unrest in the region, and we may see disruption to production.
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