UK & Europe
European markets squeezed out some small gains on Tuesday, enough at least to carry the German DAX index into new highs for the year. The DAX has risen 20% from the lows, meeting some people’s definition of a “bull market”.
More broadly, markets are drifting listlessly higher amidst lower summer volumes towards the end of earnings season and no major market-moving data.
The FTSE 100 added to morning gains as Wall Street overcame a flat open to trade slightly higher. Corporate results made Worldpay and Standard Life (LON:SL) top risers and Legal and General the biggest faller. A majority of the shares on the index were participating in Tuesday’s rise with 81 members higher by 3.30pm BST.
Most banking shares on the FTSE 100 and FTSE 250 were higher after the release of a report on the industry from the Competition and Markets Authority. Large cap banks were notable outperformers with RBS (LON:RBS) shares rising over 3.5%, Barclays (LON:BARC) up over 2.5% whilst virgin Money was the only challenger bank to gain over 1%.
There appears to be a clear understanding from regulators of the problem impacting competition for current accounts in the banking industry but less understanding on what can be done about it. The faff of switching accounts coupled with low interest rates means most people don’t shop around, overlooking potentially disingenuous overdraft fees.
US
US stocks were basically unchanged on Tuesday as low summer volumes took their toll amid no major economic or earnings data.
Gap was the biggest faller on the S&P 500 after the clothing retailer reported a drop in quarterly like-for-like sales. Fellow retailers Kohls, Target and Nordstrom were all lower in sympathy ahead of more retail sector quarterly earnings reports next week.
Shares of luxury retailer Coach fared slightly better than the rest of the retail sector, but shares were still down after it reported earnings above but revenues below estimates in the second quarter.
FX
The British pound fell to a four-week low, for a five-day losing streak after dovish central banker talk and weak economic data. Data showed a rise a Britain’s trade deficit and smaller than expected growth in manufacturing production. Steeper losses may have been avoided since the British Retail Consortium reported July retail sales were the strongest since January.
The Bank of England’s Ian McCafferty told a newspaper that “If the economy proves to have turned down in line with the initial survey signals, I believe that more easing is likely to be required, but that can easily be delivered in coming months.” The jury is still out on the Brexit-effect for the British economy; the drop in the pound doesn’t appear to have bolstered trade yet but consumers are still spending. Having slid below 1.31, which held up in late July, GBP/USD looks destined to re-test the Brexit lows and could easily make new 31-year lows if post-Brexit data disappoints next week.
The US dollar fell against the yen and commodity currencies following disappointing productivity data. Upside momentum that began last week has tapered off and dollar could well be directionless before US retail sales are reported on Friday.
Commodities
The confirmation of OPEC policy talks next month has helped oil extended recent gains. Brent crude edged back over $45 per barrel, for a five-day winning streak ahead of the release of API data. Data from the DOE tomorrow is expected to show a draw tomorrow of -1.5M and confirm the general trend of declining non-OPEC supply. While stockpiles come down, the single digit rises in the rig count needn’t be of as much concern. The strong rebound off $41.50 in Brent crude above $45 reduces the scope for a prolonged downtrend, rather just a lower range – perhaps capped before $46.50, the July 11 low which could see position covering
The lost momentum in the dollar index has translated to modest gains the price of gold and silver.
"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. "