Stocks are largely lower this afternoon as dealers are mindful of the poor finish to last week.
Europe
It has been a quiet day in term of macroeconomic news, and the better-than-expected jobs report from the US on Friday continues to hang over stocks. Ordinarily, a strong set of employment data would normally lift global equity sentiment, but seeing as a large portion of the rally was driven by the belief that the Federal Reserve will cut rates this month, equity markets are broadly lower today.
Deutsche Bank shares are in the red this afternoon even though they got off to a good this morning on the back of the restructuring news. The German finance house revealed plans to close its global equities sales and trading units, and the fixed income business will be undergo restructuring too. The turnaround scheme will cost 18,000 jobs, but the news isn’t exactly a surprise. Deutsche Bank failed to do adequate restructuring in the wake of the credit crisis, and the firm has been limping along recently. The failure to merge with Commerzbank made a drastic restructuring scheme inevitable, but given the reaction by investors today, it suggests that confidence is far from restored.
Imperial Brands pleased investors today as it revealed a £200 million share buyback scheme. Adding to the generous return to shareholders, the firm confirmed that this year’s dividend would be 10% higher on last year’s, and next year the group will move to a more progressive dividend policy. Traditional tobacco products aren’t as popular as they once were in certain markets, and that is why Imperial announced plans to invest in vaping products and e-cigarettes – which are growing markets.
Jefferies cut their outlook for Schroders to hold from buy, and the price target was lowered to 3,100p from 3,587p. Barclays also trimmed their outlook for the firm, and the bank now holds an equal weight rating, from overweight.
US
Today is the first proper day of trading since the impressive non-farm payrolls report was released. Traders took some cash off the table as the possibility of an interest rate cut this month seems less likely in light of Friday’s numbers. Recently, Jerome Powell, the head of the Fed said the argument for cutting rates has increased, but that was said in advance of the June jobs report, and Mr Powell might use the latest non-farm payrolls as an excuse to hold steady in terms of interest payments.
Apple was hit by Rosenblatt Securities as an equity analysts for the firm cut the company’s rating to sell from neutral ,and cautioned the tech giant will endure ‘fundamental deterioration’ over the next six to 12 months. The finance house predicts that iPhone and iPad sales will be disappointing, and it also predicts that other products and services like the iWatch and Homepod won’t have a ‘meaningful’ performance.
Symantec shares are higher this afternoon after Jefferies upped its price target to $24 from $19. The move comes as there is chatter that Broadcom have secured funding for its potential takeover of Symantec.
FX
The US dollar index has continued its positive run as dealers are reconsidering their views on what the Federal Reserve will do later this year in term of monetary policy. The solid jobs figure from Friday was a nice reminded to traders that the US economy is in good shape overall.
EUR/USD has been hit by the firmer US dollar, but the underwhelming eurozone economic data played a role too. The eurozone sentix investor confidence reading dropped to -5.8 – the lowest since late 2014. The German trade data showed that that imports dropped by 0.5%, while economists were expecting an increase of 0.3% .The poor reading suggests that demand is soft.
USD/TRY jumped on the news that President Erdogan removed the governor of the Turkish central bank – Murat Cetinkaya. It is believed that Mr Erdogan has been calling for lower interest rates, and Mr Cetinkaya was unwilling to loosen monetary policy. The move could be construed as a political one, and international investors are likely to remain cautious of the Turkish Lira.
Commodities
Gold has been hurt by the firmer US dollar as now that the July rate cut from the Federal Reserve has been called into question, we might see further downward pressure on the metal. Should gold remain below the $1,400 mark, it might put the $1,380 region on the radar.
Oil has crept higher today as traders viewed the respectable US jobs report as a sign the US economy is in good shape, and that demand for oil is likely to remain high. Larry Kudlow, economic advisor to President Trump, said that US-China trade talks will continue in the coming week, and that has boosted sentiment in the oil market too.
