Europe
Stock markets in Europe have pushed higher today as traders decide to take on more risk. While the situation regarding North Korea hasn’t changed in either direction, investors are using the lull to pick up relatively cheap stocks. The stalemate between the two countries continues but there are no new developments, and this has brought about buying opportunities.
BHP Billiton (LON:BLT) had a solid set of full-year figures as it returned to profit, paid a respectable dividend, and cut its debt. The mega miner even stated again its desire to sell the US shale business. The company took the difficult steps of asset stripping during the downturn in the commodity markets, and now it is in much leaner shape. The bounce back in metals prices is boosting its profits. The share price is up 2.9% today.
Tesco (LON:TSCO) have a 27.8% share of the UK supermarket sector, according to a report from Kantar Group. Their next nearest rival, Sainsbury’s (LON:SBRY) is on 15.8%. In April, Tesco announced its first annual rise in UK sales in seven years, and today’s data bodes well for the retailer. The share price was in decline throughout 2017, but it is off the June lows and is eyeing the 187p mark – this level will need to be cleared in order for a rally is to be sustained.
Provident Financial (LON:PFG) shares collapsed today after the company issued a profit warning. The CEO, Peter Crooke, has stepped down with immediate effect. The interim dividend was halted, and investors are not holding their breath for a final dividend. It appears the company is conserving whatever cash it has. A share price decline of this magnitude, will make it very difficult for the company to get financing – should they require it. Companies don’t recover from a shock like this easily, and attracting fresh buying will be tough.
US
The Dow Jones, S&P 500 and Nasdaq 100 are all higher on the session as traders adopt a more risk-on strategy. Yesterday marked the beginning of the 10-day US and South Korean military exercise, but investors were quick to return to buying mode today.
No news is good news as far as dealers are concerned, and despite the US still being at loggerheads with North Korea, we are seeing move money flow back into stocks while things remain the same.
It has been a quiet day in terms of economic indicators from the US, so there hasn’t been much for traders to grab onto. The Richmond manufacturing index held steady at 14 in August, and it came in above the reading of 11 that was expected. The Jackson Hole Symposium, which starts on Thursday will be the big event of the week to watch out for.
FX
The GBP/USD dropped it to its lowest level in over six weeks as traders flocked to the US dollar. The greenback rallied against a broad range of currencies, even though there hasn’t much in the way of news surrounding the greenback. The UK announced some positive news in relation to the Confederation of British Industry (CBI), as the survey of industrial orders expectations in August jumped to 13, while traders were expecting a reading of 8. The report couldn’t stem the drop in the pound.
The EUR/USD also lost out today at the hands of the strong US dollar. The single currency was already losing ground to the greenback this morning, but the German ZEW economic sentiment survey didn’t help matters, as it fell to 10 from 17.5 in July. The euro has been struggling against the US dollar this month, and we are not seeing any signs that downward momentum is declining.
Commodities
Gold is a touch lower today as traders risk appetite picks up. The safe haven asset is down on the day as investors pour their money into riskier assets like stocks. The metal is still in the solid upward trend it has been in since early July. Traders are not anticipating another interest rate hike from the Federal Reserve this year, and that will help gold.
Brent crude oil and WTI bounced back today after a severe decline yesterday, but the energy market is still range bound. OPEC members are due to meet in November, and the oil minister of Kuwait, Essam al-Marzouq stated they will talk about the possibility of extending the production cut beyond the end of March 2018. The oil cartel should not be ignored, but the group does not have the credibility it once did, as traders know they often say one thing, and do another.
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