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Europe drifts lower and BoE in focus

Equity markets in Europe are in the red as traders lock in profits from yesterday’s positive move. 

The weak finish in the US last night left traders feeling uneasy on this side of the Atlantic, and the optimistic sentiment that dominated yesterday has subsided. Traders are often nervous about holding a firm long position in the wake of a severe sell-off, and today’s move is proof we are not out of the woods yet. At midday in the UK, the Bank of England’s (BoE) update will be closely watched as it may add volatility to the pound.

Bellway shares are higher today after the company stated it foresees a 14% jump in first-half revenue. Completions rose by 6.2% and the average selling price increased by 7.2%, and the order book is up 15.7%. It was a solid update all round, and the stock is up 0.2% today. The sector as a whole has cooled as little as UK house price have nudged lower, and there is a small bit of uncertainty in relation to Brexit. The stock reached an all-time high in October, has been drifting lower since, but if it can hold above the 3000p mark its outlook may remain bullish.  

Compass Group believes that full-year sale will be at the higher end of their 4-6% target. The firm warned that costs in the UK were ‘above average’, but improved efficiency is counteracting the rising expenses. The North American operation was the best performer as organic sales increased by 8.2%, and Europe saw a 2.1% rise. The share price is up 5.2% today.

The US dollar index has hit its highest level in over two week as traders are fearful the Federal Reserve will hike interest rates at a faster pact this year. The corresponding move has been a decline in EUR/USD and GBP/USD.

The BoE update at 12pm (UK time) will be in focus and traders are not expecting any change to the monetary policy. The firmer inflation rate in the UK could prompt the central bank to use more hawkish language in its statement.  

We are expecting the Dow Jones to open down 73 points at 24,820 and we are calling the S&P 500 down 6 points at 2675.

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