Stocks are mixed today as there has been to change to the global outlook.
Europe
There is has been little in the way of macroeconomic news to jolt the markets one way or another, and for now volatility is sliding.
Debenhams revealed an 85% drop in pre-tax profits, as it blamed a ‘profound’ change in consumer habits and adverse weather. The retailer was forced to keep some shops closed due to the snow, and that contributed to a 4.1% drop in underlying UK sales. Debenhams are planning on reducing the size of some of their stores to reflect the changing retail environment. The stock has been in decline for nearly three years, and a break below 20p could pave the way for 10p to be tested.
Rentokil shares are in demand after the company stated first-quarter revenue jumped by 15.7% to £545.9 million. The firm warned that adverse movements in the foreign exchange markets would cost the company between £10 million and £15 million. In the first-quarter the company went on the acquisition trail, and bought 11 pest control companies. This is a clear sign of how bullish the company is. The share price has been in an upward trend for over six years, and if the bullish run continues, it could target 300p.
Weir Group announced plans to acquire ESCO for $1.05 billion. The takeover will complement its own business of manufacturing pumps and valves for the oil and gas, and mining sectors. ESCO are based in the US and produce equipment for the mining sector. Weir stated earnings from ESCO should be incorporated into the accounts by the third-quarter of the financial year. Weir Group shares gapped higher today, which is a bullish sign, and if the positive move continues it could target 2,326p.
Shire is popular today after it rejected an offer from Japan’s Takeda, and now there is talk that Allergan are interested in Shire too. This sort of play in common in the pharmaceutical sector as Takeda are keen to expand, seeing as patent expires are approaching. Allergan is relatively light in cash and heavily indebted, so there are no guarantees this will transpire.
US
The major indices are experiencing low volatility as the stand-off between Washington DC, Russia and China is still ongoing. Traders haven’t seen any signs of an improvement in geopolitical sentiment, which helps to explain why they are being cautious.
Shares in Procter & Gamble are lower today after mediocre guidance took the shine off the results. The company posted earnings per share of $1, just about topping the $0.98 consensus. Sales increased by 4.3% to $16.28 billion, while analysts were expecting $16.21 billion. The figures were solid, but the company said sales forecasts would be at the lower end of the 2% to 3% range.
US jobless claims were largely unchanged on the week, as they came in at 232,000, down from 233 000 last week. Economists were predicting a figure of 230,000. It is worth noting the jobless claims reading in early March was 210,000 – its lowest reading since the mid-1970s, so the US labour market is in rude health.
FX
GBP/USD can’t be held back today. UK retail sales dropped by 1.2% in March, while economists were expecting an increase of 0.5%. The poor weather was blamed for the drop in sales, but many British retailers were struggling before the ‘beast from the east’ arrived. The pound sold off after the numbers were released, but quickly recouped those losses and sterling advanced versus the US dollar. The pound has been in a bullish trend against the greenback since early March, and there are no signs of it coming to an end.
EUR/USD is broadly unchanged today. The eurozone released trade figures for March, which showed an increase in the surplus to €22.7 billion, up from €12.8 billion in February. The sizeable jump in the trade surplus indicates a strong export-driven economy. With the exception of the trade figures, it was a quiet day in terms of news from the eurozone. The currency pair has been range-bound recently, and if it holds above 1.2215, its outlook is likely to be positive.
Commodities
Gold is broadly unchanged today as there has been little movement in the greenback. It is no coincidence that the gold market has moved little while it’s been a low volatility day for the greenback. The relatively low swings in global equities has also played into the sluggish gold market today.
WTI and Brent Crude have hit fresh 41-month highs after Saudi Arabia stated they would be happy for oil to reach $80 or $100. This comes as OPEC meets today in Saudi Arabia. When it comes to the oil cartel, the Saudi’s usually get what they want. Yesterday we saw US oil and gasoline stockpiles decline, and that is playing into the upward move as well.
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