Europe
The FTSE 100 started off the day in the red, but managed to turn it around, and yet again has turned negative as we draw near the close. The London equity benchmark has been in decline since the start of the month, and the relatively strong pound accelerated the sell-off in recent trading sessions.
Retail stocks like Dixons Carphone (LON:DC), Kingfisher (LON:KGF) and Next (LON:NXT) are some of the biggest fallers on the FTSE 100, as the UK consumer confidence report by GfK pointed to a bleaker outlook. The expectation was for a reading of -7 and it came in at -10. Political uncertainty and a rise in the cost of living were sighted as reasons behind the disappointing reading.
Greene King (LON:GNK) is down 2.9% after JPMorgan (NYSE:JPM) Cazenove downgraded it to ‘neutral’ from ‘overweight’. The change in rating comes one day after the pub operator its full-year results. The company registered a rise in profits but their outlook was uncertain. The US bank lowered its price target to 750p from 810p as they feel rising costs and weakening of consumer spending will hit the business.
US
The Dow Jones and the S&P 500 are up 0.4% and 0.15% respectively as the indices bounced back after yesterday’s sell-off. The US markets were helped by some positive economic announcements. The Chicago PMI and the University of Michigan consumer sentiment reports both improved on the month and came in above economists’ expectations.
Goldman Sachs (NYSE:GS) is down due to profit taking, the US banking sector surged on Wednesday night after all 34 banks passed the second round of the Federal Reserve’s stress test.
Nike (NYSE:NKE) is the best performer on the Dow Jones after the company reported fourth-quarter figures after the closing be last night. Earnings per share (EPS) was 60 cents and the market was expecting 50 cents, and revenue came in at $8.68 billion, and that compares with the $8.63 billion that dealers were anticipating. The company announced a deal with Amazon (NASDAQ:AMZN) where by it will sell some of its products via online retailer.
FX
The better than expected inflation figures from the eurozone couldn’t prevent the EUR/USD from slipping as trader’s book their profits after the currency had an impressive run this week. The headline CPI for June came in at 1.3%, while dealers were anticipating 1.2%, and that compared the 1.4% level last year. The core CPI figure was 1.2%, and the market was expecting 1%, and last year’s figure was 1%. The core numbers tells us demand is picking up. The European Central Bank seems keen to keep their policy on hold, but it is further evidence that the region is improving.
The GBP/USD slid on the news that UK consumer confidence dropped in June. The GfK report fell to -10, and economists were predicting a reading of -7. Rising inflation, minimal wage growth and the general election outcome were contributing factors. The pound has only given back a small amount of the gains it made versus the greenback over the past five trading sessions, as hawkish commentary from Bank of England members this week is still on traders’ minds. Mark Carney, the head of the Bank of England, announced that some of the stimulus could be withdrawn, and Andy Haldane reiterated his hawkish views yesterday.
Commodities
Gold is creeping lower again. The metal has been losing ground for nearly one month and right now it seems to be devoid of volatility. It is slightly concerning that gold couldn’t push higher during a week of falling equity markets and a declining dollar. Gold bounced off the 200-day moving average at $1237 on Monday, and by the way things are going it could be testing it again. Since late 2016, gold has been in an upward trend but the latest pullback can’t seem to entice buyers.
WTI and Brent crude oil are pushing higher as the bounce back continues. The energy market still has a long way to travel to recoup the losses it suffered over the past five weeks. The long term trend and the fundamentals both point in the same direction – downwards. Since late February, oil has been in a clear down trend and even if it rallies a few dollars higher, it still wouldn’t negate the bearish move. In terms of supply and demand, the market is still suffering from over-supply and dwindling demand.
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