Stock markets in Europe are in the red towards the close as dealers trim their longs positions in the wake of the bullish move yesterday.
Between the dovish update from Mario Draghi, the head of the European Central Bank, and the remarks from Fed chief, Jerome Powell, the bulls have had a good run this week. It comes as no surprise that equities are a little lower as we approach the weekend.
The major oil rally in the last couple of sessions on the back of the heightened tensions between the US and Iran has lifted BP and Royal Dutch Shell. Iran downed a US drone during the week, and President Trump called that move a ‘very big mistake’. Mr Trump essentially warned Iran and said had a member of US military personnel been involved in the incident, it would be a different story in terms of the US’s response. The standoff between the two nations is likely to keep the underlying oil market elevated, and that should assist oil stocks.
IQE shares sold-off sharply today as the company has been caught up in the Huawei ban. The firm producers semiconductors, and the decision to ban Huawei products has had a negative knock-on effect in the supply chain, and the group now lowered its revenue guidance. The company now expects to generate between £130 million and £160 million in revenue, while equity analysts had projected £175 million. The CEO described the environment as ‘unprecedented’, and that statement rattled investors.
Ocado shares have been given a boost by Citi Group, as the bank lifted its price target for the firm from 1,300p to 1,450p.
Nanoco said that a large US client will not be extending the contract it has with the group, and that announcement sent Nanoco’s shares into a severe sell-off. Nanoco stated that the move by the US was not connected to the ‘performance of our materials and out service delivery’.
The S&P 500 is slightly lower today in the wake of the stellar session yesterday. Traders in the US are taking a breather from the major upward move of the week, and now all eyes will be on the Trump-Xi Jinping meeting at the G20 summit next week. The latest comments we heard in relation to US-China trade were optimistic, but dealers are mindful the situation is still on going, so we might see some long positions being pared back ahead of the meeting. The latest PMI manufacturing and services PMI reports were underwhelming. The manufacturing update was 50.1. – its lowest reading in over nine years, and the services reading was 50.7, its lowest in over three years. The updates both showed minimal growth, and it adds weight to the argument that the Fed should cuts rates later this year.
Red Hat shares are a little lower even though the firm announced respectable numbers last night. On an annual basis, first-quarter EPS jumped by 38% to $1, while one equity analyst was anticipating 85 cents. Revenue for the quarter just about exceeded forecasts. Red Hat confirmed that sales from infrastructure-related offerings rose by 11% on a year-on-year basis.
EUR/USD is higher again today, partially thanks to the sell-off in the greenback, but the eurozone data helped too. The manufacturing and services sectors of France and Germany all grew in June, and all the reports topped economists’ forecasts. It is still concerning that the German manufacturing industry remains in contraction territory.
GBP/USD is lower today despite the softer greenback. UK public sector net borrowing dipped from £6.8 billion in April to £5.1 billion in May, but it exceeded the forecast of £4.1 billion, and that encouraged some dealers to drop the pound.
Gold exceeded the $1,400 mark overnight, and has retreated a little, but is still up on the session. The continued weakness in the US dollar has boosted the metal as gold’s inverse relationship with the greenback has been strong recently. The metal has rallied over 9% in three weeks, and given the fact it couldn’t hold above the $1,400 mark, it might undergo a pullback.
WTI and Brent crude are higher today, in light of the US-Iran tensions. President Trump said he is in ‘no hurry’ to attack Iran, and that has cooled the political atmosphere a little. The Iranian situation is far from resolved, so some traders might be hesitant to short the oil market.