Originally published by CMC Markets
Stocks started on an optimistic note, but buying momentum has waned since lunchtime.
Europe
Tensions between the US and China have cooled, but remain at the back of traders’ minds. Geopolitical tensions continue to dominate headlines though, after the US imposed sanctions on Russia in relation to interfering in the US Presidential election, and this is adding to the cloudy political landscape.
Speculators in copper have cut their long positions in the metal to its lowest level since October 2016, according to the Commitment of Traders (COT) report. Traders feel the trade tensions surrounding China will curtail demand for the metal. Mining companies like Glencore (LON:GLEN), BHP Billiton (LON:BLT) and Anglo American (LON:AAL) are weighing down the FTSE 100 today.
Deutsche Bank (DE:DBKGn) announced that Christian Sewing will take over from John Cryan as CEO. Mr Cryan introduced aggressive restructuring at the bank in recent years, but an inability to meet targets and three years of consecutive losses prompted the change in leadership. Mr Sewing ran the bank’s retail division and now that he is at the helm, it could suggest the bank is going to focus on the retail side of the business. Relatively low market volatility and tighter regulation has hit the trading desks of most major banks, and Deutsche Bank is no different. That being said, the German retail banking sector is overbanked and isn’t particularly fruitful, so Mr Sewing is likely to face an uphill struggle. The share price is up 0.8% today, but has been in a solid decline for over four years so investor sentiment is still weak.
Rolls Royce (LON:RR) has given a green light to the sale of L’Orange to Woodward (NASDAQ:WWD) for €700 million. The British defence company has been going through a restructuring process recently, whereby it has been selling off non-core assets and focusing on a few departments. The company has plans to achieve £1 billion cash by 2020. Investors are clearly happy with the reorganisation of the frim as the share price has been broadly pushing higher since June 2016, and today it is up 1.4%.
Evraz (LON:EVRE) shares have tumbled after the US imposed sanctions on Russian tycoons. Relations between the US and Russia has deteriorated over the situation in Syria. The steel maker has large exposure to Russia, and the stock also came under pressure during the Russia/Ukraine conflict in 2014.
BP (LON:BP) is also feeling the pinch on account of its Russian exposure via Rosneft, and firmer oil prices couldn’t help the stock today.
US
US markets are in positive territory after Friday’s major sell-off. Dealers are snapping up relatively cheap stocks in early trading, as it appears President Trump is softening his position when it comes to the trading relationship with China. The US President seems to be offering an olive branch to Beijing and he has dialled down his rhetoric. Dealers are using this as an opportunity to swoop in and pick up stocks like Boeing (NYSE:BA) and Deere (NYSE:DE).
However a new conflict has arisen for the US, and now Russia is the target of it ire. The US have slapped sanctions on Russia over its actions in the 2016 election, which has soured relations with Moscow, and weighed greatly in the Russian stock market. The move just added to the negative sentiment currently running through global politics.
FX
The US dollar index continues to come off the boil, as the underwhelming US non-farm payrolls data on Friday, and the strained political tensions with China and Russia, are weighing on the greenback. On Friday, the US dollar index reached its highest level in over a month, and now traders are closing out their long positions.
GBP/USD has been pushing higher since early March, and the solid UK house price data helped the pound. The Halifax UK house price survey showed an increase in March of 1.5% on a month-on-month basis, and economists were forecasting a reading of 0.2%. It was the fastest growth rate in over a year. Long sterling positions are at their highest this year according to the COT report.
EUR/USD gained ground too, but the soft greenback is the main driver of the move. Traders were spooked to see that German exports declined at a faster rate than imports – which is cause for concern as the country is a major net exporter. President Trump has ruled out tariffs on EU products for now, but that’s not to say he won’t change his mind.
Commodities
Gold has been given a boost by the softer US dollar. The inverse relationship between the two assets continues to be strong, and gold is roughly trading in the middle of its recent range of $1355 to $1305.
WTI and Brent Crude oil are benefiting from the easing of tension between the US and China in relation to trade. The energy market is seen a barometer of global growth, and while there was tough talk between Washington DC and Beijing last week, the commodity was under pressure. If a trade war can be avoided, it is likely to be bullish for oil.