Europe
Equity markets in Europe are marginally lower on the day as traders are in wait and see mode ahead of the Jackson Hole symposium that starts tomorrow.
Today is a classic example of traders not having a major reason to buy, so stocks drifted lower. The update from Mario Draghi, the head of the European Central Bank (ECB), didn’t tell us much, so we will have to wait until he gives his speech at the central banker’s symposium. Undisclosed sources at the ECB already told us Mr Darghi will not be laying down the foundation for tapering of the stimulus package, so Jackson Hole could be a damp squib.
WPP (LON:WPP) shares sold-off heavily today after the advertising giant lowered its revenue forecast for the second time this year. The company previously predicted sales growth of 2% and now they think it is going to be in the 0% to 1% region. Traders are worried this could be the start of a string of warnings in relation to revenue and the stock dropped by 11.4%. A collapse in share price like this is difficult to shake off, and it will be tricky to attract new investors.
Mining companies have had a good run recently as the metals markets are been broadly pushing higher. Yesterday we saw solid full-year figures from BHP Billiton (LON:BLT), and today its rivals like Rio Tinto (LON:RIO), Anglo American (LON:AAL) and Glencore (LON:GLEN) are in demand.
US
The Dow Jones, S&P 500 and Nasdaq 100 are all lower on the session as the strong finish on Wall Street last night could not be replicated.
President Trump has warned the Democrats that he still plans to build a wall between the US and Mexico, and Congress must find the money to fund the project. The US is approaching the debt ceiling, and if a deal can’t be reached, Mr Trump has no problem in shutting down the government, and this is playing on traders’ minds.
Also on the political front, Mr Trump is talking about tax reform, which traders applauded last night, but, investors need to remember that he could not bring in the healthcare reforms he wanted.
In July, new home sales dropped by 9.4%, while economists were anticipating an increase of 0.3%.The shock decline suggests the US economy is not in need of another interest rate hike this year.
FX
The EUR/USD was driven higher by the impressive Germany manufacturing figures for August. Economists expected a reading of 57.7, and it came in at 59.4, and that was an increase on July’s number of 58.3. It is encouraging to see a steady increase in German manufacturing even though the euro is strong. We also saw a surprise increase in French manufacturing in August, which bodes well for the eurozone.
The GBP/USD edged lower today as there was a broad decline in the pound, even though the UK had no major economic announcements. A survey of British employers painted a gloomy picture of the UK economy. The Recruitment and Employment Confederation jobs outlook survey showed that a higher percentage of employers expected the economy to worsen, than to improve, and this took its toll on the pound.
Commodities
Gold is higher on the day as the slight wobble in global equities has prompted buying of the metal. The dip in the US dollar is also making gold more attractive to investors. The US announced manufacturing, services and new home sales figures today, and two of the three reports were negative, which is good for gold as it makes an interest rate hike from the Federal Reserve less likely.
Brent crude oil and WTI are up today after the US oil inventory figures decline was in line with expectations. The energy information agency (EIA) report showed that US oil inventories dropped by 3.3 million barrels, and the consensus was for a decline of 3.6 million barrels. Gasoline stocks dropped by 1.22 million barrels, while traders were expecting a drop of 1 million barrels.
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