Europe
Stock markets in Europe are still feeling the pressure from the tension surrounding North Korea. When President Trump declared that the US is ‘locked and loaded should North Korea act unwisely’, investors became even more fearful. For the time being, tensions seem to be going one way, and equity markets are losing ground because of it. The high drama has prompted traders to take their cash out of stocks, and invest it in safer assets like gold.
Old Mutual (LON:OML) announced a 37% jump in first-half operating profits, and it upped its interim dividend. The company stated it is on track to break-up in 2018 and is aiming to spin off two businesses via an initial public offering (IPO). Old Mutual took the decision to fragment due to changes in the regulatory environment. The company raised £108 million from the sale of Old Mutual Asset Management. The stock price of Old Mutual is down 2.3% on the day.
Mining companies are losing the most ground on the London market as the copper market has been hit by profit taking recently. The red metal it its highest level in over two years on Wednesday, and we have a retreat since then. The lower than expected import data and inflation figures from China during the week, paint a picture the country is cooling down a bit. Anglo American (LON:AAL), BHP Billiton (LON:BLT), Rio Tinto (LON:RIO) and Glencore (LON:GLEN) have all lost ground today.
US
US equities have bounced back today as a mixture of short covering and bargain hunting has set in.
The Dow Jones, S&P 500 and Nasdaq are all up on the day, but the gains they have made are tiny in comparison to what they have lost this week.
Tensions remain high between the US and North Korea and even though the US indices are showing small gains today, I wonder how long it will last ,as some traders have a habit of squaring up their positions before the weekend.
The inflation figures from the US showed us the cost of living increased slightly in July. On a month-on-month basis, traders were expecting a reading of 0.2%, and it came in at 0.1%, while the previous reading was 0.0%. The year-on-year figure for July was 1.7%, and that was an increase on June’s 1.6%, but it missed the estimate of 1.8%. The slight rise in the CPI report tells us that US demand is creeping up, but not at a particularly fast rate.
Dealers should not overlook the fact that CPI edged higher, but the undershooting of the forecasts left dealers feeling disappointed.
The hawks at the Federal Reserve would have liked to have seen a higher growth rate.
FX
The EUR/USD was helped by the US inflation report as it came in below analyst’s estimates. Several eurozone countries like Germany, France, Spain and Italy posted their inflation numbers today, and broadly speaking they were in line with expectations, but traders didn’t have much of a response to it. The single currency got its boost from the softer than anticipated US inflation data. The euro managed to climb above the $1.18 mark, but seeing as it has been in decline since the start of the month, dealers are wondering if it will last.
The GBP/USD briefly traded above the $1.30 mark as the greenback nudged lower in the wake of the US inflation report. Sterling resumed the downward trend that it has been in since last Thursday. It is worrying for the pound if it can’t hang onto gains in a short space of time. There were no major economic announcements from the UK today, so the move is down to US dollar buying.
Commodities
Gold jumped higher on the back of the US CPI numbers missing estimates, but the metal pulled back afterwards when it sunk in that CPI rose slightly. The metal created a new two month high, and is only a $10 dollars away from the 2017 high of $1296. Gold has enjoyed a winning streak recently in light of what is going in global equities. The asset has traditionally been viewed as a relatively safe place to invest in whenever times are turbulent.
WTI and Brent Crude oil are weaker on the day after it was revealed yesterday that oil production by OPEC members actually rose in July. The 0.5% increase in oil production last month added to the global supply-glut, but it also highlights that members of the cartel serve their owns interest first, rather than what is in the best interest of the group. A representative of Gazprom (MCX:GAZP) Neft (MCX:SIBN) stated yesterday that oil production should revert back to previous levels once the oil production freeze runs out in March 2018. This is adding to the selling pressure.
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