Originally published by CMC Markets
European equity markets are still suffering from the same issues, poor global trading relations and weakening emerging market economies.
Europe
These topics have been hanging over the market all week and dealers are not showing any major appetite for relatively risky assets like stocks.
Bovis Homes (LON:BVS) shares are in demand after the company announced a 41% jump in first-half profits, and the group confirmed it is on track to achieve record full-year profit. Completions jumped by 4% and revenue nudged up by 1%. The house builder said that demand is strong thanks to bank’s lending policies, the help-to-buy scheme, and rock-bottom interest rates. The interim dividend was raised by 27% to 19p, and for the first-time ever a special dividend was announced, and that pay-out was 45p. It wasn’t all good news, the average selling price dropped by 5.3%, which underlines the cooling of the housing market. If the share price remains below the 200-day moving average at 1,158p, its outlook might remain negative.
Centrica (LON:CNA) shares were given a boost by the announcement from Ofgem, the regulator, that prices will be capped. The government agency has revealed a price cap on default dual fuel energy bills of £1,136, while one group of analysts polled were predicting a range of between £1,120 and £1, 200, meaning the cap came in at the lower end of expectations. A lot of uncertainty has now been lifted from the sector, and we could see traders look favourably upon the sector.
Melrose (LON:MRON) said it has made good progress on restructuring GKN (LON:GKN) – which it took over earlier this year. Melrose specialises in turning companies around, and it confirmed the reorganising of GKN has ‘freed’ the individual businesses ‘from head office bureaucracy’. The group registered a statutory loss of £303 million, but when you strip out one-off costs, the firm saw profits jump by 83% to £240 million.
US
Stocks in New York are mixed as traders are still worried about trade tensions. The US-Canada trade talks are still ongoing and there is a possibility they could continue for weeks, and without an end date in sight, investors are likely to remain nervous. Trade tensions are still heightened in relation to China too.
It was a tale of mixed updates in terms of the US employment data. The latest ADP employment report showed that 163,000 jobs were added in August, which was well below the 200,000 that economists were anticipating. The July report was revised lower to 217,000 from 219,000. The jobless claims report dipped from 213,000 to 203,000 its lowest reading since in 49 years. Labour costs dropped by 1% in the second-quarter, and that suggests we might not see impressive wage growth or inflation in the foreseeable future. Today’s update has set the scene for tomorrow’s US non-farm payrolls report.
The ISM non-manufacturing report in August ticked up to 58.5, from 55.5 in July. Keep in mind that the ISM manufacturing report yesterday hit a 14 year high, and this paints the US economy in a positive light.
Barnes & Noble (NYSE:BKS) posted a first-quarter net loss of 23 cents per share, which is a sizeable increase on the 15 cent loss per share that was reported last year. Total revenue dropped by 6.9% and same-store-sales slipped by 6.1%. The group admitted that cutting costs along won’t provide a path to the long-term viability of the retail business, which suggests tough times still lie ahead. The stock has been in decline for over two years, and if the bearish move continues it could target $4.
FX
EUR/USD is higher even though German industrial orders dropped by 0.9% in July, which was a far cry from the 1.8% increase that economists were anticipating. The disappointing update could be a symptom of the strained relationship between the EU and the US regarding trade.
GBP/USD has crept higher today despite the uncertainty of the Brexit negotiations. Sterling shot higher yesterday when a report circulated that both the British and German governments had dropped demands in order to make it easier to reach an agreement. The Berlin administration confirmed that report was inaccurate, which prompted a reversal in the pound. This morning, the Christian Social Union (CSU) –t he sister party of the Christian Democratic Union, called on the EU to avoid a hard Brexit. The CSU is based in Bavaria, and given the sizeable manufacturing industry in the region, it is no surprise they are keen to accommodate the UK.
Bitcoin and ethereum are lower again today after it was reported yesterday that Goldman Sachs (NYSE:GS) are putting their plans to set up a cryptocurrency trading desk on hold. When major Wall Street players refrain from these markets it sends out the wrong message about the products. Ethereum fell to its lowest level in nearly one year, and if the bearish trend continues it could target $200.00
Commodities
Gold has edged higher today on the back of the softer US dollar. The metal has had a strong inverse relationship with the greenback and today is no different. The gold market has spent much of the past week in and around the psychologically important $1,200 mark. If the metal breaks above the late August high – it could pave the way for further gains.
WTI and Brent crude oil saw a jump in volatility on the back of the Energy Information Administration (EIA) report being released. According to the EIA update, US stockpiles fell by 4.3 million barrels, while traders were expecting a drop of 1.29 million barrels. Gasoline inventories jumped by 1.84 million barrels, and the consensus estimate was for a draw of 810,000 barrels.