Europe
Shares in Europe turned lower on Tuesday following a disappointingly modest rise in German investor sentiment. It’s in essence a corrective move in European shares after the huge run higher in past week that saw the German Dax top 12,000 yesterday.
Despite the 20% year-to-date gains seen in the German stock benchmark, the German ZEW rose more modestly than anticipated likely as a result of the war-of-words taking place between the countries politicians and those in Greece. Germans are basically worried they’re going to be on the hook again for Greece’s problems.
Some strength in the euro for a second day was also a difficulty for European shares trying to reach more multi-year highs.
Overall, global investors are taking some risk off the table during the Federal Reserve’s two-day meeting.
UK
A strong performance from oil companies thanks to upcoming tax breaks was supportive of UK markets on Tuesday despite weakness in the Supermarket sector after Sainsbury’s reported quarterly earnings .
Major UK-listed oil companies including Tullow Oil (LONDON:TLW), Royal Dutch Shell (LONDON:RDSa) and BP (LONDON:BP) rose despite a drop in the price of Brent crude oil on the prospect of a tax-break in the UK budget for North-Sea explorers.
Sainsbury’s shares rallied after posting a smaller than expected decline in quarterly sales but shares rolled over into a loss by afternoon trading as it marked the fifth straight quarter of declines and the supermarket said the trading environment was unlikely to improve in the near future.
Shares in Tesco (LONDON:TSCO)’s and Morrisons fell in unison with Sainsbury’s after its poor results. The supermarket sector as a big minimum-wage employer was not helped by the prospect of a rise in the minimum wage to £6.70 per hour.
Antofagasta (LONDON:ANTO) shares declined after reporting a drop in annual profits in light of the steep decline in copper prices hurting the miner’s selling price of the commodity.
Shares in RSA pulled back some of yesterday’s budget-induced losses on news it is considering selling its Latin American division as part of its restructuring plan.
Just Eat (LONDON:JE) shares jumped after the online food takeaway service projected revenue of more than £200m in 2015 as its popularity and usage numbers continue to grow.
US
Without too much in the way of drivers, US markets traded lower in early trading following a wide miss of expectations in housing data. US markets are in limbo before the possible fireworks tomorrow when the FOMC announces whether it’s altered forward guidance on interest rates.
Housing starts missed expectations by the biggest margin since 2007 to 18 month lows. The drop was blamed on weather even though the data should be seasonally-adjusted and economists would have been aware of the weather and its implications when making forecasts.
Sotheby’s shares rose by 2% after it launched a new eBay-built online auction platform.
American Airlines shares opened higher on the news it will replace Allergan in the S&P 500 after the close on March 20. It is a forced switch since Allergan will soon be under the wings of Actavis. It’s a symbol of the renewed fortunes for the airline industry down to falling fuel costs that American Airlines will join the top 500 companies in the USA.
FX
The US dollar was mixed on Tuesday with traders holding off until the statement and press conference from the Federal Reserve tomorrow.
The British pound was again looking resoundingly weak on Tuesday, losing ground against the dollar, euro and yen leading into Bank of England minutes tomorrow. BOE governor Mark Carney was notably more dovish in his speech on March 12 when he foresaw low inflation for a prolonged period.
The idea of low inflation for a prolonged period contrasts with the last Bank of England inflation report where the expectation was for inflation to snap back quickly after the effect of a low oil price has run its course. The Bank of England’s guidance on rate policy almost seems to be fluctuating as often as crude oil futures.
The euro was strong across the board on Tuesday despite worse than expected German confidence data after consumer price inflation was finalised as -0.3% year-over-year, higher than the -0.6% registered in January.
The Japanese yen was relatively flat following the policy meeting from the Bank of Japan in which no further easing was indicated.
Commodities
Commodities were walling together on a strong dollar and the weak growth outlook from China that prompted the Chinese Premier to suggest more easing may be on the way.
Gold was surprisingly volatile for the first day of the Fed meeting, dipping through recent lows to $1,142 per oz before reversing sharply within the hour to back above $1,159. The yellow metal reversed almost to the cent off the December 1st low which triggered the move higher back to above $1,310 per oz in January.
Having closed well off its lows yesterday, Brent crude oil sank as much as 2.5% back to new lows beneath $53 per barrel.
Having failed to break through the top of its recent trading range at $2.70 per lb, copper sank over 1.5% to the bottom of the range around $2.62.
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