Europe
Stock markets are broadly positive, despite the turbulence at the G7 meeting at the weekend. Traders seem unfazed by the tough talk from President Trump. The markets are likely to stand their ground until there is a formal reaction from other members of the G7. Donald Trump is playing hardball, but he would probably settle for a compromise, and some dealers suspect it is all a ploy to get a better deal for the US in terms of trade.
On Friday, Inmarsat (LON:ISA) announced that it rejected a takeover bid from EchoStar (NASDAQ:SATS). The board knocked back the offer as they felt it ‘significantly undervalued’ the business. The share price is up 14.6% today, and if it remains above its 200-day moving average at 490p, it could target 600p.
Rolls-Royce (LON:RR) shares are lower today as traders are anticipating the company will announce job cuts on Friday. The market chatter is that the firm will reveal 4,000 job losses. Rolls Royce is keen to strip out management layers and the company has ambitious restructuring plans, as it aims to trim five departments down to three. The after-sales service department makes up the lion’s share of the business, and investors will be eager to find out the investment plans for the division. The dividend guidance will also be in focus, especially since it was cut in 2016 – the first reduction in over 20 years. The share price has been in decline since August and if the negative move continues, it could target 800p.
JP Morgan upped its price target for Ferguson (LON:FERG) shares from 5,985p to 6,080p. The stock gapped lower on the open, but has recouped ground during the session. The share price has been in an upward trend since February 2016, and if the wider bullish moves continues, it could retest 6,300p.
US
Stock markets are relatively calm considering the way things were left at the G7 meeting. President Trump threatened to stop trading with nations that don’t cut their tariffs on US products. Washington DC are taking a hard-line approach with other members of the G7 in a bid to rebalance the trading relationship.
Donald Trump pointed out that Canada have heavy tariffs on US dairy products, and he feels this is unfair on US farmers.
The US president is set to meet North Korea’s Kim Jung-un today in Singapore, and the meeting could greatly improve political sentiment in that part of the world.
FX
GBP/USD sold-off sharply after the UK revealed disappointing economic data. In April, industrial output and manufacturing output dropped by 0.8% and 1.4% respectively. The deficit in the goods trade balance widened from £12 billion to £14.03 billion, while economists were expecting it to drop to £11.3 billion.
EUR/USD is creeping higher due to a broad rally in the euro. Giovanni Tria, Italy’s new economy minister, pledged his support for the euro yesterday. Italian industrial production dropped by 1.2% in April, but it failed to dampen the single currency. The European Central Bank meeting on Thursday will be in focus as there is speculation the bond buying scheme could be wound down this year.
USD/CAD is higher today as Donald Trump hit out at Canada’s tariffs on US dairy products over the weekend. Canada is a major exporter to the US, and the deterioration in relationship could keep pressure on the Canadian dollar.
Bitcoin is lower today after Coinrail – a South Korean cryptocurrency exchange – confirmed it was hacked at the weekend. The digital currency fell to a two-month low, and a break below $6,500, could pave the way for $6,000 to be targeted.
Commodities
Gold is a little higher today because the US dollar is a touch softer. The metal has experienced low volatility recently, and the trading range is likely to remain narrow in the run-up to the Federal Reserve meeting on Wednesday. Gold might find it difficult to hold onto a rally until the Fed meeting is over.
WTI and Brent Crude have drifted lower as the oil market continues to be subdued. After reaching multi-year highs last month, the energy market has been hit by profit taking. There is chatter Saudi Arabia and Russia will increase output, and the market might remain lacklustre until after the OPEC meeting later this month.
DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.