Originally published by CMC Markets
The FTSE MIB was lower today as traders are concerned about the new coalition, but it has recouped some of the earlier losses.
Europe
The Italian Chamber of Deputies will vote on the new government today, and it is widely expected to be given the green light. The Italian economy has been muddling along for several years, and now the new coalition wants to shake things up by increasing public spending and cutting taxes. The bold move could be the kickstart the Italian economy needs, but it also runs the risk of making matters worse.
The other major indices in Europe drifted lower in the afternoon, but many have staged a comeback as the close neared. Trade talks between the US and China have improved a little, but we are still a long way from an agreement. The prospect of a trade war is also playing on investors’ minds.
Oxford BioMedica (LON:OXB) confirmed they are entering into a licencing agreement with Axovant Sciences (NASDAQ:AXON) in the US. Oxford BioMedica have produced a treatment for Parkinson’s disease, and Axovant Sciences are equipped to offer it to patients as quickly as possible. Provided the treatment satisfies certain sales and regulatory hurdles, it could be worth up to $842.5 million for Oxford BioMedica. The share price hit its highest level in almost 10 years, and if the bullish move continues it could target 900p.
Shares in Workspace (LON:WKP) are lower despite the company announcing impressive full-year figures. Pre-tax profit soared by 91 9% to £170.4 million, which comfortably topped analysts’ expectations of £80.65 million. Net rental income and property valuations rose by 30% and 5% respectively. The total dividend was boosted by 30% to 27.39p, marginally above the consensus estimate. The property firm hopes to raise £190 million from a share placing. The move would fund capital expenditure. The share price has been in an upward trend since October 2016, and the sell off today might entice bargain hunters.
British Land (OTC:BTLCY) shares have been hit by a downgrade from Credit Suisse (SIX:CSGN). The bank lowered its rating from neutral to underperforming, and cut the price target from 710p to 695p.
US
Equity markets are a mixed bag as the US is dealing with trade negotiations on three fronts. The Russell 2000 and NASDAQ Composite hit fresh records, but the latter has since turned negative. The Dow Jones and S&P 500 are showing moderate gains.
China has offered to purchase $70 billion worth of US goods in exchange that no extra tariffs are imposed on Chinese goods. This is being viewed as a step in the right direction, even though nothing has been agreed upon.
Mexico confirmed it will impose tariffs on a number of US imports, such as potatoes, pork, steel and certain cheeses. The move from the Mexican government is hardly a surprise given that the US drew first blood. Tyson Foods (NYSE:TSN) and Dean Foods (NYSE:DF) are both lower because of the tariffs.
The EU will slap tariffs on US goods like jeans, orange juice and motorcycles from July. This is Brussels’ way of getting back at Washington DC for placing levies on European steel and aluminium. The relations are slightly strained heading into the G7 meeting at the end of the week, but this is how President Trump likes to do business.
FX
EUR/USD was given a boost by Peter Praet and Jens Weidmann – European Central Bank (ECB) policy makers. Mr Praet predicts an increase in earnings will push up inflation, and Mr Weidmann announced that it is ‘plausible’ the ECB could bring the stimulus package to an end in 2018. Given the economic soft patch the region is going through at the moment, some traders might not share their optimism. The single currency has been pushing higher since last week, and if the positive move continues it could target 1.1830.
GBP/USD is benefitting from the softer US dollar. There were no major economic announcements from the UK today, and traders are mindful of the solid services PMI report that was released yesterday. Sterling has been gaining ground against the US dollar for just over a week, and if the upward move continues it could target the 1.3500 area.
Commodities
Gold has been lifted by the dip in the greenback, and is currently hovering around the $1,300 mark. Recently the metal has run into resistance at $1,307, the 200-day moving average, and while it remains below that metric its outlook might stay negative. The Federal Reserve will meet next week, and dealers are widely expecting an interest rate hike, so gold’s gains might be limited between now and then.
WTI and Brent crude oil were put under pressure after the Energy Information Administration released the latest US inventory figures which showed an unexpected build in oil stockpiles, and a larger-than-expected increase in gasoline inventories. Oil stockpiles jumped by 2.07 million barrels while traders were anticipating a drop of 3 million barrels. Gasoline inventories soared by 4.6 million barrels, and the consensus estimate was for an increase of 719,000 barrels.