market relief

Mining and oil companies are the biggest gainers on the London market.

Even though underlying commodity prices haven’t been too impressive today, the companies involved in those industries are in demand today, the companies involved in those industries are in demand today. We have seen multi-year highs being reached in oil and platinum recently, and copper and palladium have been robust too, and this is playing into the natural resources stocks. This week will see the release of Chinese manufacturing figures, and it could add volatility to the commodity related stocks as the country is a major consumer of raw materials.

Diamonds have been a noticeable under performer in the commodity space, and this is partially the reason behind the profit warning from Petra Diamonds. The company has lowered its production output by approximately by 5.1%, and it is now going to focus on quality rather than quantity.  The rebound in the South African rand is also hurting the company’s bottom line. The share price has been in decline since for the past 13 months, and if the bearish trend continues it could retest 60p.

There were a few changed to company ratings by investment banks which prompted activity today. Numis raised their price target for Smurfit Kappa Group to 2800p from 2600p, and the stock is up 1.5% at 2570p on the back of it.

Diageo shares came under pressure after RBC trimmed their price target to 2400p from 2600p. The investment bank lowered its outlook on the sector to perform from outperform.

US

US markets have been hit by profit taking as the Dow Jones, S&P 500 and NASDAQ 100 are all in the red. The bounce back in the US dollar promoted dealers to dump US equities as they are more expensive for overseas investors.

The rhetoric used by President Donald Trump over the weekend in relation to the EU trade policies sounds like he may be interested in a trade war with region. This is not to say that traders are expecting any sort of spat immediately, but this could be the foundations of such a trade dispute. It is a relatively quiet news day, so traders are clinging onto what they can.

The core personal consumption expenditure on an annual basis remained steady at 1.5%, in line with expectations. The indicator is the preferred measure of the Federal Reserve, and its will well below their target of 2%. The US central bank will announce their interest rate decision on Wednesday, but no change is expected. The statement that follows could provide an insight as to what the central bankers are thinking.

 FX

The bounce back in the greenback has knocked the pound. GBP/USD is under pressure are the US dollar is recouping some of the ground it lost last week. The lack of major economic news from the UK today has made traders focus on politics. There continues to be concerns that Brexit talks are not going according to plan, and chatter  about Tory rebels doing the rounds is also undermining Prime Minister May’s position. Some of the sell-off in sterling can be attributed to Downing Street worries.

EUR/USD has also suffered at the hands of the turnaround in the greenback. The single currency reached a new three year higher high last week last, and now traders are keen to lock in their profits. President Donald Trump proclaimed he is eager to pursue ‘fair’ trade agreements, and he feels the EU have been ‘unfair’ when it comes to exports from America. The EU have made it clear they would participate in a trade war with the US should that situation be warranted.   

Commodities

Gold had dropped to a five day low as the rally in the US dollar has hurt the metal. Even though global equities are broadly weaker, dealers haven’t seeking the so-called safe haven status of the metal. Gold may be lower today, but it remains in the upward trend that it has been in since December. If gold holds above the 1326 mark, its outlook may remain positive.

WTI and Brent Crude oil are in the red as robust US dollar has encouraged traders to take some money off the table. The energy market has been pushing higher for nearly seven months, and we have seen some pullbacks from time to time, and now the firmer dollar and concerns about growing US supply levels is weighing on the market

Last week the number of active rigs in the US rose to 759, up from 747 according to the Baker Hughes.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.