Europe
European equity markets are in the red as traders are sensing a shift in central banker’s policies. Last night the Federal Reserve revealed the minutes from the June meeting, and policymakers are divided over further interest rate hikes and the timing of when to begin reducing the balance sheet. This division is adding to the uncertainty in the markets as traders can’t predict the Fed’s next move. Adding to that, the European Central Bank considered leaving out the promise to keep buying government bonds, and that contemplation alone, has spooked investors.
Reckitt Benckiser (LON:RB) revealed that last week’s cyber-attack could cost the company up to £100 million in lost revenue. The share price hit an all-time high in June and has been retreating since, and today’s announcement caused the stock to gap lower. The business has an impressive revenue stream and the cost in relation to the cyber-attack is likely to be one-off, so investor sentiment could swing back to positive in the medium term.
Associated British Foods (LON:ABF) is one of the biggest gainers on the FTSE 100 after the company reported a double digit rise in revenue at its clothing division Primark. The third-quarter sales were above expectations, and the Primark division has a track record of being the parent company’s golden goose.
US
Indices in the US are lower on the day as a combination of mixed signals from the Federal Reserve and varied economic updates have prompted traders to cut and run. It would appear that the Fed hiked rates last month because they had to rather than because they wanted go, and the US central bank is talking about additional tightening even if inflation remains soft. The Fed are also divided over as to when to kick off the process of reducing the size of their balance sheet. The deep division among policy makers does not project a confident united front and dealers are picking up on that.
The ADP employment report showed that 158,000 jobs were added in June, while the market was expecting 185,000, and the jobless claim number was 248,000, and the consensus was 243,000. This worried investors ahead of the non-farm payroll figure tomorrow. The economic news wasn’t all bad: services and ISM non-manufacturing data expanded on the month and topped estimates. Once again, the hot and cold economic data is leaving traders wondering, which way to look as there is no clear direction the US economy is heading in.
FX
The EUR/USD pushed higher as solid retail numbers from the eurozone gave the single currency the edge over the greenback. Then the weakness in the US dollar due to the underwhelming jobs data propelled the euro higher again. For most of the week the EUR/USD has been in decline after a strong performance last week, but now the tide is turning. The European Central Bank discussed leaving out the comment about pledging to buy government bonds, and this is adding to the euro’s rally. The hefty fall in the ADP employment report has put traders in a cautious mood ahead of the non-farm payrolls report tomorrow.
The GBP/USD has also benefited from the downturn in the US dollar. There were no major economic announcements from the UK today, so the move is attributed to the slide in the US dollar. Last night, the minutes from the Fed’s latest meeting talked about continuing with interest rate hikes and starting to reduce the size of the balance sheet. Currency traders were not entirely convinced the Fed is that hawkish, and after today’s ADP and jobless claims numbers you can see why they are sceptical.
Commodities
Gold has finally moved higher after some disappointing jobs data from the US encouraged buying. The ADP employment initial jobless claims reports both showed a weakening in the jobs market, and both came in worse than expected. These figures have set the tone for tomorrow’s non-farm payroll announcement. Last night the minutes from the Fed meeting informed traders that the US central bank is more focused on economic growth, but growth prospects are dampened in light of today’s jobs data.
Brent crude oil and WTI surged after the energy information agency (EIA) showed that oil inventories dropped by 6.29 million barrels, and the expectations was for only a drop of 2.3 million barrels. The energy market slumped yesterday, and bargain hunters were already driving up the price this morning, but the inventory data sent the commodity flying. Such a massive drop in stockpiles will chip away at over-supply in the market.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.Original post