Europe Under Pressure; Capita Crushed Again

Europe Under Pressure; Capita Crushed Again

CMC Markets  | Feb 01, 2018 18:44

Europe

Equity markets in Europe had a slow start to the day but the small buying enthusiasm tuned into a sharp decline. January saw record highs on the FTSE 100, DAX and CAC 40 but the mood has soured and the traders are exiting equities.

The Caixin survey of Chinese manufacturing for January remained steady at 51.1, and it slightly exceeded estimates of 51.3. The second largest economy in the world has been cooling down, and an absence of a strong manufacturing sector has given traders and excuse to sell shares like Glencore (LON:GLEN), Anglo American (LON:AAL) and BHP Billiton (LON:BLT).

Royal Dutch Shell (LON:RDSa) shares have been hit by profit taking even though the company posted solid figures. In the fourth-quarter the firm posted profits on a current cost of supplies (CCS) basis at $4.3 billion, and that was a 140% improvements on the previous year’s figure, and it exceeded the forecast of $4.24 billion. It was hailed as a year of ‘transformation’ as cash flow greatly improved after it trimmed costs in the wake of its merger with BG in 2016. The share price is down 2.7% today has been in a strong upward trend since January 2016, and the outlook remains positive.

Cranswick (LON:CWK) had a robust third-quarter and a strong Christmas period. The firm stated export sales are ‘well ahead’ of expectations and that capacity is going to be increased as investment in the business is being boosted. The stock is up 5.2% today and has been pushing higher since June 2016, and if the bullish move continues it could target 3400p.

Capita (LON:CPI) share suffered a severe sell-off yesterday after the company issued a profit warning, suspended its dividend and declared it’s hoped to raise £700 million via a rights issue. The company lost over 40% of its value yesterday and it’s down another 12.3% today.

Vodafone (LON:VOD) shares are 4.8% lower after it revealed a 3.6% drop in revenue for the third-quarter. The relatively weak quarter was attributed to the sale of its Dutch unit and tough competition in India.

US

US stocks are mixed today as the Dow Jones and S&P 500 are slightly in the red, while the Nasdaq 100 is currently posting small gains. The common theme across the stock markets is low volatility. February has begun on a relatively quiet note, especially when you consider many fresh record highs were posted last month.

Janet Yellen gave her last update yesterday as the chair of the Federal Reserve, and in keeping with her form, there were no major surprises. Interest rates were kept on hold, but there were signs of a more hawkish outlook view seeping through.

The US jobless rate in the US fell to 230,000 from 231,000, and that backs up the better than expected ADP employment report from yesterday. Investors will be focused on the non-farm payrolls report tomorrow.

FX

The US dollar has improve since this morning but is still in the red. The update from the Federal Reserve last night has gotten traders thinking about the possibility of an interest rate hike in March. Last night’s update revealed that inflation remains weak, but some of the based indicators are improving. Dealers are cautious about in a rate hike in March.

EUR/USD is higher today as the weakness in the US dollar is boosting the single currency. The eurozone continues to post impressive economic indicators as Italian manufacturing hit as level not seen since March 2011. The French manufacturing industry cooling a little from December, but that was a seven year high.

GBP/USD has been helped by respectable UK economic updates and the dip in the dollar. UK house prices on an annual basis increased by 3.2% according to Nationwide, which easily topped the 2.5% estimate.

Commodities

Gold is a touch weaker in the wake of Fed’s update alt night. The metal hasn’t lost much ground today, but now that traders are weighing up the prospect of an interest rate hike in March from the US central bank the commodity could start to under pressure. Gold has been in an upward trend since mid-December, but if it were to break below 1326, it could turnover.

Brent WTI crude oil have crept higher today as stronger commitment to the coordinated production cut by OPEC members is outweighing the increase is supply from the US.

America is now producing more than 10 million barrels per day – its highest level since 1970. The rise of the shale industry is behind the jump in oil production. The energy market has been in a solid upward trend since June and we have yet to see any signs of a turnaround.

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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