UK and Europe
Caution took hold of stock markets on Tuesday ahead of the March meeting of the Federal Reserve. Equity benchmarks remain close to two-month highs, but no extra stimulus from the Bank of Japan and the price of oil at its lowest in over a week led to some modest profit-taking.
Brent crude has fallen to its lowest in seven-days after topping $40 per barrel and is raising questions over the sustainability of the rebound. The IEA’s call for a bottom in oil appears to have in fact, called a short-term top.
The FTSE 100 was weighed down by mining shares after Chilean miner Antofagasta (LON:ANTO) scrapped its dividend, which acted as a sharp reminder of the industry’s suffering after the hefty drop in metals prices.
Shares of Antofagasta tanked after the Chilean copper-miner scrapped its final dividend after annual earnings crashed over 98%. Margins are pretty slim so the 25% slump in copper prices last year decimated profits. The rise in the price of copper this year, in combination with some heavy cost-cutting has helped a dramatic rebound in the share price. If copper has put in its low, there’s a good chance this is the last time the dividend needs to be scrapped.
Legal & General (LON:LGEN) shares fell after the UK’s biggest pension manager reported a rise in profits and lifted its dividend in line with expectations. A drop in retirement new business comes after the government changed to annuities laws and could be put under further pressure from this week’s budget.
Sainsbury (LON:SBRY) shares gave up early gains after it saw its first quarterly sales increase in two years. The sales turnaround is a great achievement amidst what is still heavy competition from the discounters. The good Sainsbury’s results do raise a question over whether the intended purchase of Argos-owner Home Retail could see them take their eyes off the prize just as things are coming together.
RBS (LON:RBS) shares were atop the leader board after a broker upgrade.
US
Stocks in the US slipped in early trading in line with weak international sentiment after the Bank of Japan left policy on hold and oil prices fell as the Federal Reserve begins its two-day policy meeting.
Shares of Canadian drugmaker Valeant Pharmaceuticals (NYSE:VRX) dropped over 40% after cutting guidance and missing Q4 earnings estimates. The eye-watering decent comes as the company faces pressure from regulators and even US presidential candidate Hilary Clinton over its business practices.
Avon (NYSE:AVP) shares dropped 8% on the news it will move its corporate headquarters from the US to the UK, having sold its North American business in December.
FX
The US dollar was flat on Tuesday after mixed US economic data ahead of Wednesday’s Fed meeting. US retail sales fell -0.1% m/m in February as expected but data for January saw a sharply lower revision to -0.4%. The Empire State manufacturing index surprisingly snapped a streak of contraction that began in June, rising to 0.6 in March.
The Japanese yen rallied after the Bank of Japan left interest rates and its quantitative easing programme unchanged at its latest policy meeting. The jump in the yen came despite the BOJ offering a more cautious view on inflation and the economy. The BOJ is in wait-and-see mode after its surprise move towards a negative interest rate policy. USD/JPY dropped beneath 113 to a three-day low.
The British pound was a top FX faller after a poll by The Daily Telegraph found voters more in favor of a Brexit, bolstering the Leave campaign. GBP/USD fell to a three-day low beneath 1.42.
Commodities
The price of Brent crude has fallen four of the last six days, its worst run in three weeks as chances become more remote of a joint output freeze amongst OPEC and non-OPEC producers while Iranian production ramped up significantly last month.
The price of gold fell to a nine-day low after falling sharply over the past three days, as the dollar picked up strength against commodity currencies ahead of the FOMC meeting. The failure to hold $1240 per oz takes gold back inside its old down-sloping price channel and suggests a bigger retrenchment toward $1200.
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