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Europe builds on gains, Wall Street tumbles and gold shines

Europe builds on gains, Wall Street tumbles and gold shines

Stock markets are largely positive this afternoon but the trade tensions are still bubbling away in the background. 


Central banks in New Zealand, Thailand, and India all cut rates overnight and that highlights how concerned central bankers are about the state of the global economy. The Fed cut rates last month, and there is speculation a further loosening of monetary policy is in the pipeline, and it seems like other central banks are toeing the line of the Fed. The equity benchmarks in Europe that are higher, are showing small gains, and it doesn’t exactly project an air of confidence, and there is a sense the recent bounce is on shaky grounds.

Not that long ago Unicredit was considering merging with Commerzbank, and in light of the updates from the banks today, it is best that the two organisations didn’t tie the knot.  Unicredit lowered its full-year revenue guidance, and it warned about the lower interest rate environment. Profit, excluding one-off items slipped by 0.4% from the same timeframe one year ago. Net interest margin and the common equity tier ratio edged lower too. Meanwhile, Commerzbank said it achieving its profit target for this year, would be ‘significantly more ambitious’ in light of the ‘worsening’ economic climate. Operating profit in the second-quarter fell by 26%, and provisions for loan losses surged in the three month period. Both stocks are in the red today.

Standard Lift Aberdeen shares are in the red as first-half profit dropped by 10% on an annual basis to £280 million, while undershot the forecast of £288 million. The group registered net outflows of £15.9 billion, and that was higher than expected. On the bright side, cost savings are on the rise. Given the uncertainty in the financial markets at the moment, the stock price is likely to remain under pressure.

Glencore shares have fallen today on the back of the poor first-half numbers. Earnings came in at $5.9 billion, undershooting the $5.9 billion forecast. A combination of lower copper prices and higher costs caused the division to post a loss of $315 million. The miner said it would close its biggest cobalt mine in Congo on account of the weak prices. The share price is likely to remain under pressure on account of the US-China trade tensions, as metals and miners are being hurt across the board.


The sharp drop in government bond yields has driven US stocks lower, as the movement in the bond markets is a clear sign that traders are in risk-off mode. The slump in US equities underlines the fear traders have in relation to the trade dispute with China, and there is a feeling the worst has yet to come. 

Match Group shares surged to a record-high as the firm posted solid second-quarter figures last night. Revenue for the three month period jumped by 18% to $498 million, topping the forecast of $489 million. Tinder had 5.2 million average subscribers in the quarter, which was a sizeable improvement on last year’ figure. Traders welcomed the third quarter guidance as the firm anticipates revenue of between $535 million and $545 million, while equity analysts were expecting $521 million.

Disney revealed poor third-quarter figures, and that triggered a drop in the share price. EPS was $1.35, while missed the $1.75 forecast, and revenue was $20.25, which missed forecasts too. The Studio division performed well with a 33% jump in revenue, and the media networks operation posted a 21% rise. The group cited the poor performance of the assets it acquired from Fox as reason for the earnings miss. Disney+, the streaming service, will be launched in November, and the business will compete with Amazon Prime and Netflix, and the division will be closely watched by traders.    


EUR/USD has been propped up by the drop in the US dollar. It has been a quiet day in terms of economic updates from the eurozone. German industrial production dropped by 1.5% in June, while economists were only expecting a fall of 0.4%. The currency bloc continues to produce poor economic reports, but the dip in the dollar is taking precedence. 

Despite the largely soft US dollar, GBP/USD is slightly lower on the day. The Halifax HPI report showed that average prices for the three months until July on a yearly basis increased by 4.1%, while the previous report was 5.7%. The fear of a no-deal Brexit is hurting the pound. 


Gold hit a new six-year high as the weakened greenback and the plunge in US stocks has driven up the value of the metal. Gold is benefitting from both the inverse relationship in the US dollar, and the flight-to-quality effect. Should the bullish run continue it might target $1,555 in the next few weeks.  

Oil sold-off sharply in the wake of the Energy Information Administration report, which showed a build in oil and gasoline forecasts. Oil stockpiles jumped by 2.38 million barrels, while traders were expecting a drop of 2.84 million barrels, and gasoline inventories grew by 4.43 million barrels, and the consensus estimate was for a decline in stockpiles. 



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