Originally published by CMC Markets
Stocks are broadly lower as dealers await the Federal Reserve interest rate decision later on.
Europe
European markets have been lacklustre today as traders are in wait and see mode. Playing into the mix is also the continued trade uncertainty that is hanging over the markets. In the latest development of the US-China trade spat, Beijing have cut import tariffs on a wide range of goods, and the reduction will be introduced in November. The move is designed to cushion the blow for importers. The action from Beijing suggests they are playing the long game.
Boohoo (LON:BOOH) shares are in fashion today after the firm posted solid first-half figures, and upped its outlook. Sales and profit rose by 50% and 22% respectively. Demand is strong across all regions, as the UK division saw a 43% rise in sales while the international business posted a 62% jump in sales. The overseas unit now accounts for 41% of group revenue, and that shows the company isn’t overly dependent on the British operation. The group’s previous full-year revenue forecast was for growth of between 35-40%, and now it is expecting growth of 38% - 43%. The figures were robust, and compared with the wider fashion industry, they are stellar. The share price gapped higher this morning, and while it holds above the 200-day moving average at 186p, its outlook might remain bullish.
AA shares are in the red after the company posted a 17% drop in first-half earnings. The adverse weather at the beginning of the year was a major contributing factor in breakdowns attended hitting a 15 year high. The insurance department registered a 7% rise in motor policies. The company trimmed its pension deficit by £154 million, but the interim dividend was slashed by 83% to 0.6p. The share price has been losing ground for over three years, and if the bearish move continues it could target the 70op region.
US
Stocks are a little higher today as traders are counting down the clock until the Federal Reserve update. The interest rate decision will be released at 7pm (UK time), and the statement will follow at 7.30pm (UK time). There is an extremely high probably the US central bank will hike rates, and there is a 77% probability of a rate hike in December too. The statement is likely to be the highlight of the evening, and dealers will be trying to ascertain how hawkish the Fed are likely to be at the back end of the year.
Nike (NYSE:NKE) shares are in the red again after the company posted solid first-quarter figures, whereby the revenue and the earnings per share exceeded expectations. The stock lost ground in after-hours trading last night, and it has fallen again today. The stock has been in an upward trend for 11 months, and if the positive move continues it could target $90.00.
New home sales jumped by 3.5% in August, while economists were expecting an increase of 0.5%. The July report was revised from -1.7% to -1.6%. When you take an average of both reports, it paints a mediocre picture of the housing market.
FX
The US dollar index is edging higher in advance of the Fed meeting this evening. The greenback has been relatively weak in recent weeks, and now we are seeing some traders square up their positions ahead of the announcement. In August, the greenback hit a 14 month high, and if the Fed are hawkish in their stance, we could see the dollar drive higher.
EUR/USD lost ground due to the firmer US dollar. French consumer confidence slipped, as the September report was 94, and the August report was revised lower from 97 to 96. The dip in consumer confidence is concerning as France is the second-largest economy in the eurozone.
GBP/USD also came under pressure on account of the pop higher in the US dollar. The Confederation of British Industry realised sales for September was 23, which easily exceeded the 16 that economists were expecting.
Commodities
Gold is in red as traders look ahead to Fed meeting. The metal’s strong inverse relationship with the US dollar continues, and nudge higher in the greenback has hurt the metal. Gold can be very sensitive to announcements from the Federal Reserve, and it is likely we will see volatility spike this evening. Gold has been in a downward trend since April, and if the Fed issued a hawkish update, we could see another move to the downside.
WTI and Brent Crude are lower on the day, but both oil contracts have managed to rally despite the Energy Information Administration (EIA) report showing an increase in oil and gasoline stockpiles. The EIA update showed a build of 1.85 million barrels, while traders were expecting a draw of 1.6 million barrels. The American Petroleum Institute revealed a surprise rise in stockpiles last night, and that could have tempered expectations.