Europe
Disappointing manufacturing and services reports from France, in addition to Germany, has weighed on European stock markets.
The flash PMI reports form the two largest economies in the eurozone highlighted the slowdown in the currency bloc. Germany is the powerhouse of Europe, but the manufacturing PMI reading was the weakest in over a decade, hence why there is selling pressure. Trade tensions between the US and China are being felt around the world, which is a factor in the poor eurozone manufacturing updates. When US-China trade talks ended abruptly last week, it dampened the mood a little, which is playing out today too.
The UK travel sector has been in focus as Thomas Cook (LON:TCG) went administration. The firm was been struggling for months under the weight of a mountain of debt, which eventually proved to be too heavy for the company. Traders reacted to the news that by snapping of Tui (LON:TUIT) as well as EasyJet (LON:EZJ) as the belief is that consumers will seek out more reputable companies’ when it comes to booking holidays. The travel sector as a whole has been hit by squeezed margins, so the removal of a major player from the industry should take some of the pressure off the firms that are still in existence.
Marks and Spencer (LON:MKS) shares are in the red today after it was revealed that Humphrey Singer, the chief financial officer, is stepping down after just over one year in the role. The company is undergoing a restructuring plan in a bid to halt the share price decline. Over the summer, Jill McDonald, the director of clothing, home and beauty left the company. The stock is down 4.6%.
Kier Group (LON:KIE) won a contract with Yorkshire Water, which is worth £750 million. The agreement will last for five years, plus it has an option to be extended for an extra three years. Kier are getting back to basics, which includes taking on fewer, but more profitable contracts. Today’s announcement hasn’t helped the share price, as traders are still hung up on the fact the group registered a loss last week. The firm posted a loss on account of one-off costs regarding asset sales, so at least the turnaround scheme is working slowing.
US
The major equity indices are a little in the red as traders are concerned about the US-China trade situation. Last week, trade delegates from both sides had talks that were ‘productive’, but the Chinese delegates left the US sooner than originally planned, hence why traders are mildly worried about the situation. The trade dispute has been going on for over one year, plus it has been the catalyst for some of the major sell-offs in recent months, so it is clearly important to traders.
It is a little concerning that neither the Dow Jones nor the S&P 500 took out their recent highs, as they are unlikely to receive a boost from the US-China trade situation in the near-term. The flash PMI reports were mediocre as the manufacturing reading ticked up to 51, from 50.3, topping forecasts, while the services reading was 50.9, but economists were expecting 51.3.
FX
EUR/USD is in the red on the back of the poor manufacturing reading as well as services report from France and Germany. The French reports showed a slowing of growth in manufacturing plus services, which both undershot forecasts too. The German manufacturing industry has been experiencing negative growth in 2019, so today’s news that is dropped to its lowest level in more than a decade hammed home the point that the sector is in trouble.
It was a quiet day in terms of economic news from the UK, so the negative move in GBP/USD has been largely caused by the firmer US dollar. Sterling hit its highest level against the US dollar since mid-July on Friday, so a bit of profit taking isn’t a huge surprise.
Commodities
Gold is pushing higher as uncertainty about the health of the European economy combined with US-China trade woes has prompted traders to seek out assets that are deemed to be safe havens. Traders’ risk-off strategy is lifting gold. If gold continues to hold above the $1,500 mark, the wider bullish trend should continue.
Oil's volatility has dropped as tensions in the Middle East have cooled. The fact that Saudi Arabia have gone to the UN in relation to the drone attack suggests the situation is less likely to result in a military conflict. It was reported the Saudi’s have restored approximately 75% of the oil production that was lost, which has added to the subdued moves in the oil market.
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