Europe
Stock markets in Europe turned lower around lunchtime, and now they are set to finish firmly in the red. Whatever bullish sentiment existed in the first half of the session has disappeared, and the firmer euro and pound are playing a role too.
Shares in Greencore (LON:GNC) crashed today after the company issued a profit warning. It would appear that a poor performance at the American operation was behind the warning. The company now expects earnings per share (EPS) to be in the range of 14.7p – 15.7p, and that compares with the previous prediction of between 15.7p – 16.6p. The CEO, Patrick Coveney, will take over the running of the US division in a bid to turn it around. The stock fell to a level not seen since 2013, and until the American unit has been restructured, investor sentiment could continue to be tepid.
Antofagasta (LON:ANTO) shares are in demand today after the company revealed a robust set of results. Revenues and profits jumped by 31% and 533% respectively. Shareholders received a nice boost too as the dividend was hiked by 177%. It is clear the company has turned a corner from the commodity rout days. Firmer copper prices more than offset the slight dip in production.
TP ICAP (LON:NXGN) posted a 0.4% rise in underlying pre-tax profits to £233 million, which was well below analysts’ expectations of £288 million. Volatility in the financial markets was at a record low last year, and that is impacting the interdealer broker. Major banks are also reducing their risk exposure to the markets, which is also squeezing their business.
US
US indices are mixed this afternoon as traders are uneasy about political uncertainty in Washington DC. The Dow Jones and S&P 500 are clinging on to gains, while the Nasdaq 100 has been hit by profit taking – after the market hit a new record in early trading.
Rex Tillerson has been replaced by Mike Pompeo as secretary of state. According to President Trump, it was their disagreement over Iran that triggered Mr Tillerson’s departure. There have been many changes to Trump’s administration and investors dislike the political unpredictability.
US headline inflation continues to tick up and it now stands at 2.2%, up from 2.1% in January. The Federal Reserve has a 2% target and that is why the bulk of traders are factoring in a rate hike this month. The core inflation rate held steady at 1.8%. This paints a picture of slightly softer demand in the US.
FX
The US dollar index took a hit on the back of the announcement that Rex Tillerson was fired. The story broke around the same time the US inflation data was reported. The dollar was shaken by the political uncertainty from the Trump administration.
EUR/USD has nudged higher due to the weakness in the US dollar. Although it is encouraging to see a sizeable jump in Spanish CPI, it had little impact on the euro. The cost of living in Spain ticked up to 1.1%, up from 0.6%. It is impressive that Spanish is rising in an era when eurozone rate is declining.
UK chancellor, Philip Hammond, delivered his spring statement, but it sparked more political interest, than financial interest. Mr Hammond stated that debt would fall as a share of GDP, and he hinted at an increase in public spending later this year – both were welcomed by sterling bulls.
Commodities
Gold has crept up on the back of the weaker US dollar. The inverse relationship between the two markets remains to be strong. Overall, volatility in the gold market has been low. The metal has been in a downward trend since late January, and with the possibility of an interest rate hike from the Federal Reserve this month, we could see continued pressure on the commodity.
WTI and Brent Crude ticked up after it was reported that Mr Tilllerson was relieved of his duties as secretary of state, as he was in favour of the Iranian nuclear deal. Dealers felt there was a higher probability of the agreement being reversed on the back of his departure. The push higher didn’t last long and the oil market turned lower again, as the old concerns about oversupply are still doing the rounds.
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