Markets in Europe have picked up where they left off yesterday opening higher with the weak pound and higher oil prices helping push the FTSE100 strongly above the 7,400 level.
The rise in Brent crude prices through $75 a barrel along with a positive broker note on BP (LON:BP) from Goldman has seen the oil and gas sector continue to lead the recent gains.
According to the note BP is on the cusp of delivering one of the strongest pipelines of new oil and gas projects this year. with the share price back near its highest levels this year a lot of this good news may already be priced in, however if oil prices do head back towards $80 a barrel as seems probable then we could see further gains in the coming weeks.
On the downside high street bookmakers have taken a beating on concerns that the stake on Fixed Odds Betting Terminals might be cut from £100 to a maximum of £2, with William Hill (LON:WMH) sharply lower, along with Paddy Power Betfair (LON:PPB) and Ladbrokes (LON:LCL) owner GVC Holdings (LON:GVC). This has also raised concern that other gambling taxes may rise to offset the loss of tax revenues that this cut would precipitate.
The latest UK public sector borrowing numbers came in slightly better than expected for March posting the lowest annual borrowing figure in 10 years and below the OBR’s prediction of £45.2bn. The effect on the pound was fairly minimal with the US dollar still looking fairly well supported.
In the US shares in Google parent Alphabet (NASDAQ:GOOGL) don’t appear to have moved the dial that much in after-hours trading despite posting a significant increase in revenues, a rise of 26%, with a lot of the growth coming from advertising on mobile search and YouTube. There does appear to be some concern about the growth in capital spending with $7.3bn in Q1 alone, well in excess of the same period a year ago, however it is an age old adage that if you don’t invest in your infrastructure in the short term you pay the penalty eventually in the long term. Investors will tolerate higher capex if it helps keep the business sustainable in the face of higher traffic and increased resilience which seems the case here. The only cloud here remains about the increased threat of regulation at a time when privacy and content rules are coming under ever increasing scrutiny. A lot has been made of some of the content that gets displayed on Facebook (NASDAQ:FB), and it can only be a matter of time before lawmakers turn their attention to YouTube.
Apple shares (NASDAQ:AAPL) have been hit hard in recent days over concerns about a slowdown in handset sales so todays warning by Austrian chipmaker AMS that sales in the latest quarter would be significantly weaker than forecast. This warning by another of Apple’s main suppliers suggests the real possibility that we may well be past peak iPhone, or that current price points may well have been pushed beyond the point at which they are sustainable.
US markets look set to open slightly higher according to early indications as bond yields soften further after yesterday’s failure to crack the 3% level on the US 10-Year.
Dow Jones is expected to open 90 points higher at 24,538
S&P500 is expected to open 11.5 points higher at 2,681.5
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