UK and Europe
European markets fell on Friday after a flood of economic data that saw the Eurozone economy grow faster than expected in March but also return to deflation.
Stock markets have finished another central bank-dominated week on a sour note after the Fed left the door open to a June rate hike and the Bank of Japan dashed hopes of additional monetary easing. Stocks, which are lower on the week, appear to have disentangled from oil prices, which hit fresh 2016 highs on Friday.
The last week aside, April has been a good month for markets with the FTSE 100, German DAX and French CAC all notching up a second positive monthly return. It’s been even better stateside, where the major averages came within 2% of record highs.
Sentiment has been damaged by Italy’s ENI (MI:ENI), which disrupted what was looking like a clean sweep of oil majors beating earnings expectations. ENI’s results have market’s second-guessing oil companies’ ability to slash costs enough to survive the decline in oil prices.
On Friday the FTSE 100 dipped after disappointing updates from Royal Bank of Scotland (LON:RBS) and BA-owner International Consolidated Airlines (LON:ICAG).
Shares of British Airways parent IAG (LON:ICAG) fell toward the bottom of the FTSE 100 despite swinging back into a first quarter profit after it curtailed growth plans on signs of lower demand as a result of the Belgium terror attacks. The pronouncements from IAG are surprising given a much more positive outlook from the budget airlines on the effect of the terror attacks. The evidence so far was that bookings were diverting from terrorist-hit areas like Turkey towards traditional holiday destinations like Spain. Chief Executive Willie Walsh also cited a slowdown from higher-margin business customers. This may well correspond to a slowdown in travel amongst bureaucrats between Britain and Belgium.
Shares of Royal Bank of Scotland (LON:RBS) dipped as much as 5% after the bank reported that losses had doubled to nearly £1bn. The loss would have been more bearable since it pertained to paying the UK government £1.2bn to remove the Dividend Access Share in order to be able to start paying dividends again. However, the delay to its separation of Williams and Glyn likely means a delay to paying a dividend.
US
US stocks dropped on Friday, as better corporate earnings from Amazon (NASDAQ:AMZN) and LinkedIn (NYSE:LNKD) failed to lift sentiment damaged by mixed earnings from US oil majors Exxon (NYSE:XOM) and Chevron (NYSE:CVX), weak first quarter growth and central bank uncertainty.
LinkedIn smashed earning expectations and shares opened strongly before coming off the highs. The results are actually quite odd. Last quarter the stock nosedived 40% in one day because LinkedIn issued weak guidance for this quarter, which they have now far exceeded. Investors will be relieved at the strong earnings, but are still well down on the year, and would probably have preferred a less rocky ride with more accurate guidance.
Shares of Amazon gained as much as 10% on the open after well-received quarterly results. The company has now been profitable for 4th quarter in a row despite massive expansion ($29bn in revenue vs $22bn last year) thanks to its cloud computing unit, Amazon web services and its Prime subscription service.
FX
The US dollar was lower across the board after data showed personal spending rise less than expected, the Chicago PMI widely miss expectations and consumer confidence fall more than expected. The decline adds to losses in the wake of disappointing first quarter GDP data.
The Japanese yen rose to an 18-month high with USD/JPY briefly dipping below 107 for the first time since October 2014. The Bank of Japan have lost the confidence of markets after failing to deliver on more stimulus despite hints it might do so by governor Kuroda and the Japanese economy falling back into deflation.
The euro gained against the dollar and the pound after Eurozone GDP rose faster than expected despite a return to annual deflation with CPI falling to -0.2%.
Commodities
Oil prices made fresh 2016 highs as traders focus on slowing US production a weaker dollar having largely already discounted the expected rise in OPEC production as Saudi Arabia reported it expected record oil exports in the next month.
The weaker dollar and weak sentiment in equity markets saw metals prices leap higher with gold and silver both over 1.5% and copper rising by over 2.5%.
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