Yesterday, banking shares recouped some of the losses picked up over the past few days but shell-shocked investors have shown little enthusiasm for the rest of the market. The sharp sell-off this week has put the validity of the post-Brexit rally under the microscope.
The impact of Thursday’s Bank of England decision whether or not to cut interest rates will be widely felt. The market can’t make its next directional move, particularly with regard to banking and insurance shares until the BOE makes it decision.
Volatile oil prices, where Brent and WTI crude contracts both fell below their 200-day moving average has weighed on oil and gas stocks.
Well-received corporate results from HSBC (LON:HSBA) and Next (LON:NXT) have limited the downside for the FTSE 100, which spent most of the day just under the breakeven mark. Mining stocks were mixed after Rio Tinto (LON:RIO) reported its quarterly earnings whilst utilities including Centrica (LON:CNA) and SSE (LON:SSE) were lower following a report from regulator Ofgem.
The announcement of a share-buyback from HSBC has calmed nerves and helped bank shares recover after a dramatic two-day sell-off. Banks are not out of the woods yet, but there are only so many days on the trot that the shares of some of Europe’s biggest banks can strike new record lows. The two-ended squeeze of low profits in a low interest rate environment and regulatory pressure to build up capital reserves means capital raising is a case of great importance.
Shares of HSBC gained over 3% despite a 29% drop in profits after the bank announced a share buyback worth $2.5bn, using proceeds from the sale of its Brazil business.
Next shares rose as much as 4% after beat earnings estimates. Next’s Chief Executive Lord Wolfson said the retailer had not seen any impact from Brexit
US
US stocks drifted higher in early trading on Wednesday as the Dow Jones Industrial Average aimed to snap a seven-day losing streak.
Twitter (NYSE:TWTR) shares popped as rumours emerged that the faltering social media company could receive a takeover offer from a large shareholder.
Shares of Fitbit (NYSE:FIT) jumped over 10% after the fitness band-maker beat profit expectations. The results helped the firm avoid fresh lows below $12, having previously traded as high as $52.
FX
Traders focused on strong private payrolls data to push the dollar higher on Wednesday, despite a miss on the July non-manufacturing PMI. ADP reported 179k jobs were created in July, above the 170k expected and 172k from June. The dollar rebounded off 95 and 5-week lows.
The British pound was mostly unmoved by data showing no change from an initial reading on the service sector. The July UK services PMI matched the flash estimate of 47.4, down from 52.3 in June and its lowest level since March 2009.
Commodities
Having slid for eight of the last nine days, the price of oil attempted a recovery on Wednesday but a surprise build in US inventories saw early gains erased. An outside chance that Tropical Storm Earl could disrupt Mexico’s Campeche oil region was lending some support to oil prices.
Gold prices have stumbled just below $1370 per oz, this year’s closing high after a slightly better expected ADP private payrolls number increased the odds of a strong payrolls number on Friday. A stronger than expected payrolls report would go some way to offset the dollar bearishness that has ensued since the poor Q2 growth figures.
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