Equity Weakness Persists; Sterling Slides

Equity Weakness Persists; Sterling Slides

CMC Markets  | Jul 09, 2019 17:27

Europe

Stocks are in the red heading into the close as traders are less hopeful that the Federal Reserve will adopt a very dovish stance. The non-farm payrolls update on Friday prompted dealers to adopt a less dovish prediction for the Fed, and that has led to a move lower in stocks.

Ocado (LON:OCDO) shares have bucked the trend today as the firm produced good first-half figures. Adjusted group revenue increased by 10.5%. The retail revenue component rose by 9.7%, while the fees from solutions partners jumped by 36%. The company is coming from a much lower base when compared with the major traditional supermarkets, but it is clear the firm’s popularity is increasing. The fire at the Andover facility was cited as the reason for the large drop in earnings. Ocado issued a bullish outlook and that boosted investor confidence. The group is ‘excited about the future’ and it has the capacity to sign up more deals in other countries.

Bovis Homes (LON:BVS) issued an upbeat trading update. The house builder said that demand is robust despite the political uncertainty in relation to Brexit, and the group said that first-half profit should rise. The number of completions increased by 4.2%, and the average selling price edged up by 2.1%.

Micro Focus International (LON:MCRO) confirmed that first-half revenue dipped by 5.3%, but the group kept its full-year outlook, and it predicts that annual revenue will decline by between 4% and 6%. On the bright side, adjusted earnings margin edged up by 2.8% to 40%, and it predicts it will complete its transformation programme by 2020.

US

The Dow Jones is in the red and the S&P 500 is fractionally lower as dealers remain a little fearful that the Fed won’t be as dovish has some traders have hoped. The solid headline jobs report from the US on Friday tiled expectations about future monetary policy, and now we are seeing stocks retreat even further from the all-time highs that were set recently.

PepsiCo (NASDAQ:PEP) shares are a little lower this afternoon as the company posted solid second-quarter results. EPS were $1.54, which topped the $1.50 forecast, and revenue was $16.44 billion, which fractionally topped the consensus estimate. Organic revenue jumped by 4.5%, which topped the 4.4% forecast.

Acacia Communications shares surged after it was reported that it will be bought out by Cisco (NASDAQ:CSCO) Systems for $70 per share.

Levi Strauss (NYSE:LEVI) is expected to announce its second-quarter numbers after the close tonight. The fashion house listed in March, and that was the same month it’s released its first-quarter figures which were well received. Revenue for the three month period edged up by 7% to $1.43 billion, and that was the mid-point of the group’s forecast, and the full-year guidance was maintained.

The JOLTS report for May was 7.32 million, which slightly undershot the 7.47 million forecast, and the April figure was revised lower from 7.44 million to 7.37 million. The number of job openings has drifted lower throughout 2019, but it is still considerably higher than the level in early 2018, so the jobs market is still in good shape.

FX

GBP/USD is under pressure on account of the firmer US dollar, but some disappointing UK consumer data played a role too. The British Retail Consortium said that UK retail sales increased by 0.6% in the year that ended in June – the lowest rate since record began in 1995.

EUR/USD is a little lower due to the continued rebound in the US dollar. The latest Italian retail sales report showed a decline of 0.7% in May, which undershot the 0.2% growth forecast that economists were expecting.

Commodities

Gold is in the red again on account of the firmer US dollar. Given the impressive rally the metal underwent in June, it isn’t a major surprise that gold has pulled back a bit. Should the commodity drift lower, it might find support in the $1,380 region, and a break below that region might put the $1,360 on the radar.

WTI and Brent crude are a little higher today as the dust has settled in the wake of the OPEC+ meeting ,where production cuts were extended for an additional nine months. US-China trade talks will resume this week, and dealers are viewing no negative news as a positive for the energy market.

CMC Markets

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