UK and Europe
An early rally fizzled out in afternoon trading as European markets edged out a third day of gains which began with the Bank of England’s “sledgehammer” monetary policy decision on Thursday.
The FTSE 100 has broken above 6800 as data from Visa shows consumer spending picked up in July, showing Britain’s shoppers undaunted by the potential risks of Brexit.
Mining and financial company shares were leading gains following mixed trade data from China and a broker upgrade for Barclays (LON:BARC). Hikma Pharmaceuticals (LON:HIK) was propping up the UK benchmark equity index as investors continue to bemoan the company’s warning over generic competition that plunged the shares by double digits last week.
Shares of Anglo American (LON:AAL) are near the highest in a year and BHP Billiton (LON:BLT) rose to fresh nine-month highs on Monday. Mining companies are being helped by a belief that government and central bank stimulus will support commodity demand.
Visa said in its report that UK consumer spending is “holding up” but at “lower levels of growth.” The latest PMI data was a clear sign that business confidence took a knock in the wake of the referendum, but the picture has been more mixed for consumers.
Data from GfK showed a sharp decline in July, but individual retailers have suggested there has no clear negative effect on results. It will be a good thing for investors as well as businesses once some hard economic data for July comes in to give a truer picture of the British economy post-Brexit.
US
US stocks opened higher on Monday amidst a rise in oil prices and an improvement in the economic outlook following Friday’s bumper nonfarm payrolls data.
Shares of Delta Airlines (NYSE:DAL) fell as it grounded flights worldwide because of IT problems. The grounded flights will mean customer compensation and poses a bigger reputational risk.
Wal-Mart (NYSE:WMT) shares fell slightly after it announced it would acquire online retailer Jet.com for $3bn.
Pharmaceutical shares were amongst the worst performers after mixed results from Allergan (NYSE:AGN), which reported the sale of its Anda drug business as a discontinued operation.
FX
A move to risk-on trading meant the Japanese yen was the biggest FX decliner as Japan’s emperor signalled he was ready to abdicate. USD/JPY rose to 102.50 after failing to close below 101 last week, increasing the odds that the June 24 low of 99 marked an interim bottom.
Commodity currencies the Australian dollar and the Norwegian krone were the top FX risers amid a 2% rise in the price of oil and weakening but unalarming Chinese trade data.
Commodities
Oil prices have risen amid renewed talks of an output freeze, with Brent crude oil reaching back above $45 per barrel. The economic, political and religious rivalry between Saudi Arabia and Iran means any hopes of an oil output freeze from Venezuela are likely to be dashed.
Still, as Iran’s output nears historical levels, an agreement to freeze production will become more in its economic interest and increase the chance it will put its other differences with Saudi Arabia aside. Iran’s output has expanded much quicker than most expected, making agreement amongst larger producers at November’s OPEC meeting a distinct possibility.
A lack of US economic data meant gold trading was fairly thin on Monday, though the US dollar index and share prices on the rise for a fourth day have bearish implications for gold moving forward.
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