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Europe lower on account of Fed, but Barclays bucks trend

Stock markets are weaker today after the Federal Reserve released the minutes of their latest meeting last night. 

The update pointed out that prices are ticking up and the inflation rate is likely to hit their target of 2%. This spooked traders in the US last night, and the sell-off spilled over to Asia and now it has trigged selling in Europe. The prospect of higher interest rates in the US could put pressure on over-indebted American companies as their borrowing costs would creep up.  

Barclays revealed a 23% jump in pre-tax profits to £4.5 billion, but dealers were anticipating £4.7 billion.  The bank plans to more than double its dividend next year, and that is what caught traders attention. The bank took a hit of £2.5 billion in relation to selling the African business, and it set aside an additional £700 million for the mis-selling of PPI. The changes to US tax laws will cause a one-off cost of £900 million, but in the long run it will be positive for the bank. Revenue from trading the markets declined by 15% - which puts it ahead of most of its peers. The common equity tier 1 (CET1) ratio is 13.3%, which is a healthy level and tells us the bank is well capitalised. The stock is up 5.3%, and hit its highest level since May, and if the bullish run continues it could target 235p.

GBP/USD was hit by the slightly weaker than expected growth figures from the UK. The second-reading of UK growth for the fourth-quarter came in a 1.4%, and economists were anticipating it to remain at 1.5%. The pound has been a bit on the soft side against the US dollar lately, and this prompted dealers to dump sterling.

EUR/USD is largely unchanged even though the German IFO business climate report came in below estimates. The report fell to 115.4, from 117.6 last month, and the consensus was for 117. French CPI held steady at 1.5% meeting expectations, and it encouraging to see that demand in France remains unchanged.  

At 1.30pm (UK time) the US will announce the jobless claims report and the consensus is for it to remain unchanged at 230,000.

Hewlett Packard Enterprise will reveal their first-quarter figures today.

We are expecting the Dow Jones to open down 78 points at 24,719 and we are calling the S&P 500 down 5 points at 2696.

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