UK and Europe
It was a more mixed day in European markets on Thursday as stocks on the continent advanced while the FTSE 100 pulled back from its 2016 high.
Soft earnings from Burberry (LON:BRBY) and a poorly-received update from housebuilder Persimmon (LON:PSN) were a drag on the UK stock market. Oil prices remained buoyant but rising uncertainties over the outcome of this weekend’s producer meeting in Doha caused resource shares to flat line.
Shares of Burberry dropped sharply, before recovering as the day went on, after sales fell in the six months through March and the luxury retailer warned of a “challenging” demand environment.
The luxury sector is going through a bit of an inflexion point. There are signs China’s economy is turning a corner but the anti-corruption drive is still in full swing and that is damaging for global luxury demand. Still, there are signs of specific weakness within Burberry since Luxury retailer LVMH (LON:0HAU) reported rising sales in the first quarter, although fashion sales were flat. Maybe it was lucky timing or maybe the company is missing some of her magic, but Angela Ahrendts seems to have walked away at not far off peak-Burberry.
Persimmon shares slumped despite the housebuilder reporting a rise in revenues since the start of the year on fears sales growth has slowed and that moderating house price inflation will eat into prices.
Shares of ITV (LON:ITV) were amongst the top risers on the FTSE 100 while mid-cap Entertainment One (LON:ETO), owners of Peppa Pig, leaped 12% on rumours of a possible deal, though Entertainment One has denied receiving any approach. The rumour is entirely believable since ITV has been building up its studios division with acquisitions. ITV may well be mulling an offer but Entertainment One’s denial suggests that for now, it is just a rumour.
US
US stocks were flat in early trading as investors digested corporate results from Bank of America (NYSE:BAC), Blackrock (NYSE:BLK) and Delta Airlines (NYSE:DAL) amongst others.
Shares of Bank of America opened lower after the bank reported a 13% profit decline thanks to a slump in trading and a drop in net interest income to the lowest on record. Adjusted revenue from FICC trading dropped 17% from a year earlier as increased market volatility saw investors stay away. The prolonged period of low interest rates continues to weigh on the traditional lending side for US banks. Bank of America’s missed out on improvements in consumer lending that benefited JP Morgan Chase (NYSE:JPM).
Market volatility has eaten into profits at the world biggest asset manager BlackRock, but shares have risen thanks to a rise in the dividend of 5% and $300m in share buybacks. Quarterly profit has fallen 20% thanks to a drop in performance fees because active investment strategies have struggled to beat the market.
FX
Asian currencies dropped sharply versus the dollar after Singapore’s central bank surprisingly cuts interest rates with the Japanese yen the best performer in the region.
The dollar was more mixed against the G10 universe of currencies after US consumer price inflation rose less than expected by 0.1% m/m in March whilst jobless claims fell. The Fed’s Dennis Lockhart said he will not advocate a rate hike in April, but this has already been largely discounted in markets.
The British pound was one of the top fallers after the Bank of England voted 9-0 to leaves rates unchanged and highlighted the risks to the economy of the Brexit referendum. The BOE specifically mentioned sterling as something that could be implicated by uncertainty over the vote.
Commodities
The price of oil traded near its 2016 highs after the IEA said it expects limited impact from any oil output freeze at Doha but instead believes lower US production will mean the oil oversupply is almost gone in second half of the year. It’s true that the freeze itself has little meaning when the Saudis and Russia are already pumping at record volumes but by working with nations outside of the organisation, OPEC extends its influence and increases the chance of success of cut down the line. Oil has become a barometer for global growth. Improving Chinese economic data that saw exports rise for the first time in nine months yesterday is improving the outlook for growth in markets, despite IMF reports to the contrary, and oil prices are moving higher accordingly.
The silver price was unchanged after reports from lawyers involved that Deutsche Bank (DE:DBKGn) has settled a case of the manipulation the silver fix.
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