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Europe muted while Wall Street roars

Europe muted while Wall Street roars

It is a mixed picture in Europe as we approach the end of the trading session. 


The FTSE 100 was in positive territory for much of the day, but as mining stocks drifted lower, so did the equity benchmark. China revealed disappointing trade figures, and there seems to have been a delayed reaction to the numbers, and now mineral extractors like Rio Tinto are firmly in the red. Chinese imports fell by 7.3% in June, which exceeded the 4.5% fall that economists were anticipating, and that underlines the poor demand levels in the second-largest economy in the world. 

Thomas Cook shares took another tumble today after Fosun offered a rescue package to the struggling group worth £750 million. It is believed that the talks are in the advanced stage, and should the deal go through it would give Fosun control over the company’s tour business. The CEO, Peter Frankhauser, let the cat out of the bag when he said it wasn’t outcome they ‘wanted’, but it was ‘pragmatic’, and that sign of weakness was picked up by traders.

Sophos Group shares are in demand after the group posted solid figures. Quarterly revenue and operating profit jumped by 7% and 10% respectively. The 11% drop in hardware revenue was balanced out by the 10% rise in subscription growth. The billing for Next Generation rose by 43%, and the firm anticipates further growth.

Daimler issued its fourth profit warning this year, and the group predicts to post a loss in the second-quarter. The car manufacturer cited the recall of Takata airbags, and tougher rules in the wake of the diesel emissions scandal as the reason for the lowering of the forecast. The US-China trade dispute has brought about an increase in global trade tensions, and the German manufacturing sectors also has Brexit uncertainty to contend with, so the sector as a whole is likely to remain under pressure.               

WPP said it intends to sell a 60% stake in Kantar to Bain Capital, and it attributed a $4 billion value Kantar. WPP has been undergoing a restructuring programme as traditional advertising agencies are losing out to the likes of Google and Facebook, and WPP will use the funds to pay down debt.            


The Dow Jones and the S&P 500 hit fresh record highs as dealers feel the Fed will trim interest rates. The bullish run is powerful in the major indices, but the fact the Russell 2000 hasn’t even retested the May highs highlights that smaller capitalisation stocks aren’t getting the same lift as the big international US firms. It would appear bullish move driven by the dovish comments from Jerome Powell, seem to have a far greater impact on the large global US stocks.   

PPI cooled from 1.8% to 1.7%, which topped the 1.6% forecast. The core PPI rate held steady at 2.3%. When you take into account that US core CPI edged up yesterday, it paints a picture of firm demand, which in a way calls into question the Fed’s apparent desire to lower interest rates.

Illumina shares have slumped after the firm said it predicts that second-quarter will be $835 million, while the consensus estimate is $887.9 million. The firm is still aiming for revenue growth of approximately 6%, while the previous forecast was for growth of roughly 13%.               


It was been a lacklustre day on the currency markets. The US dollar index, is a little softer today as traders feel the US central bank will loosen monetary policy at some point in the year.

EUR/USD is fractionally in the red even though eurozone industrial production figures were solid. The report showed the May reading increased by 0.9%, and that comfortably topped the 0.2% forecast.

GBP/USD extended its gains from yesterday when the Bank of England financial stability report stated the UK banking system can withstand a disorderly Brexit. Sterling has been in a downward trend since April, and if the wider bearish move continues it might retest the 1.2440 region.                                        


Gold is up on the day as the softer greenback as lifted the metal again. Gold printed a six year high last month, and since then it has largely been trading sideways. Its volatility has cooled but, while it remains above the $1,382 mark, the bullish trend is likely to continue.    

WTI and Brent crude are slightly higher this afternoon as dealers remain bullish on the energy, thanks to the political tensions surrounding Iran, falling US oil inventories, and disruption caused in the Gulf of Mexico due to tropical storm Barry.      


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