Europe
European markets are largely in the red after President Trump confirmed the US will impose tariffs on steel and aluminium from the EU, Mexico and Canada. The levies will kick in at midnight, and the announcement put major strain on European equity benchmarks.
The political sentiment in Italy has improved, and if a government can be formed it would boost investor sentiment. However, traders are still mindful that underlying anti-establishment feelings are still prevalent in the country. The Spanish market has given up earlier gains as Prime Minister Mariano Rajoy is facing a vote of no confidence tomorrow, and early indications suggest Mr Rajoy will lose the vote.
FirstGroup (LON:FGP) announced the departure of the CEO, Tim O’Toole, along with some underwhelming full-year figures. Wolfhart Hauser will switch roles from Chairman to Executive Chairman, and CFO Matthew Gregory will also take on the role as COO. Revenue grew by 1%, meeting estimates. Pre-tax profit dipped by 4.8% to £197 million, which was below the consensus estimate of £199 million. The iconic Greyhound business in the US has been struggling recently, and the company plans a full review of the division. The passable figures coupled with the management shake-up knocked investor confidence. Traders will want to hear a clear plan about how the company is going to turn itself around before buying the stock.
CRH (LON:CRH) shares are higher today after the company announced plans to merge a number of their European and US businesses in a bid to boost profitability. The building materials group plans to increase core earnings margin by 300 basis points by 2021. The stock has been pushing higher since March, and if the positive run continues it might reach 2900p.
Shares in Premier Oil (LON:PMO) have been given a boost by the rally in the underlying oil market over the past year. The company has confirmed it will be added to the FTSE 250 as of Monday 18 June. The notoriety is nice, and seeing as certain investment products track that index, the shares will be in demand.
The US is set to impose tariffs on EU steel and aluminium as of midnight, and car manufacturers like Volkswagen (DE:VOWG_p), BMW (MI:BMW) and Daimler (LON:0NXX) are all in the red on the back of this. European officials confirmed they will not negotiate while under threat, and they have warned they will target certain US products with tariffs in revenge.
US
The confirmation from the White House that levies will be imposed on aluminium and steel from Canada, Mexico and the EU has hurt US indices. Protectionist policies have a history of damaging economies, and investors fear a backlash from the respective countries.
The US economy is continuing to tick along nicely, as the jobless claims rate dipped and the core personal consumption expenditures (PCE) met expectations. Last week the jobless claims number fell from 234,000 to 221,000, while economists were expecting 228,000. The core PCE rate is the preferred inflation gauge by the Federal Reserve, and the rate came in at 1.8%, in line with estimates. The Chicago PMI report for May was 62.7, which comfortably topped the consensus estimate of 58. These reports point to steady growth in the US economy, and the Fed are likely to remain on their hiking path.
FX
EUR/USD is broadly unchanged due to the bounce back in the greenback. The correction in the US dollar in the afternoon eroded the euro’s earlier gains. The inflation rate in the eurozone jumped to a one-year high of 1.9%, but it failed to propel the single currency higher. Nonetheless, the surge in the cost of living in the region highlights the rise in demand.
GBP/USD has also lost ground in recent hours, but is still higher on the session. Today’s move has been dominated by the greenback, as the pound rallied in the morning even though UK house prices grew at a slower rate than expected. On an annual basis, UK house prices grew by 2.4% according to Nationwide. Economists were expecting growth of 3%.
Commodities
Gold has edged up and positive momentum is rising, but it is having trouble clearing $1307, the 200-day moving average. After suffering a big sell off in the middle of the month, the metal has found it difficult to make a sustained rally. The uncertainty in equity markets on the back of the Trump tariffs could push gold higher as traders seek a relatively safe asset.
The oil market is experiencing an unusual level of divergence, where Brent Crude is higher on the session and WTI is in the red. The latest Energy Information Administration (EIA) figures showed a decline of 3.6 million barrels of oil in the US, while the consensus estimate was for a drop of only 534,000 barrels. Gasoline inventories grew by 534,000 barrels while traders were anticipating a draw of 1.36 million barrels.
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