European equity markets are set to finish in positive territory. 

Europe

The bullish move in the S&P 500 last night helped sentiment in this part of the world today. Also, in the past 24 hours, there is increased optimism in relation to US lawmakers reaching an agreement with regards to the coronavirus stimulus package. Nancy Pelosi, form the Democrats, suggested her side might row back on some of their previous demands in an effort to try and reach a compromise with the Republicans. Dealers are looking ahead to the release of the minutes from the latest Fed meeting. The update is likely to provide more details as to why the Fed is keen to do what it takes to assist the economy. It is worth noting that since the last Fed meeting, the US unemployment rate has fallen to 10.2%. The minutes will be posted at 7pm (UK time).         

Hochschild Mining shares are in the red as first half profit post-exceptional items tumbled to $6.5 million, from $29.5 million last year. Revenue dropped by 35% to $232 million. The pandemic prompted the closure of mines, - gold production fell by over 45%. On the bright side, the company is more optimistic about in its outlook for the second half, and it is keen to cash in on the recent rally in gold and silver. Net debt jumped to $58.4 million from $33.2 million, which is a little concerning because servicing a much higher level of debt is not ideal when uncertainty persists in relation to the Covid-19 situation.

It was announced that Dean Finch, the CEO of National Express, will step down as CEO on 31 August.  The group has begun its search for his replacement, and in the meantime, Chris Davies, the CFO, will take over as the interim CEO. Shares in the transport group have fallen to their lowest level since late March as the outlook for the sector remains weak. 

Morrisons have had a relationship with Amazon since 2016, and in that time period, the range of products available to purchase via the arrangement has increased. Now Amazon Prime customers can avail of all of Morrisons’ goods, and there is a free same day deliveries on orders over £40. The move should increase competition in an already competitive sector.     

The British government is working with Heathrow airport in relation to testing passengers for Covid-19. The motivation behind the move is to try and shorten the quarantine time. British Airways parent, International Consolidated Airlines Group are up over 6%. Other airlines such as easyJet, Wizz Air and Ryanair are higher too.

AP Moeller – Maersk, the largest shipping company in the world, posted well-received second quarter numbers and it is optimistic about demand in the near-term. The bullish update from the shipping company says a lot about global demand.

US

The mood continues to be bullish in the US as the S&P 500 has notched up yet another intra-day record-high, and the NASDAQ 100 is higher too. The Russell 2000 is over up 0.4% so the broader sentiment is positive also. Hopes that politicians could be closer to brokering a stimulus package deal, are helping stocks. The Fed minutes will be in focus and anything less than dovish language would be a surprise.    

Target had a terrific second quarter as the retailer was allowed to remain open as it was deemed to be an essential service, so it hoovered up a lot of business. The well-established group was well-positioned to take advantage of the surge in demand. Total revenue jumped by almost 25% to $23 billion, topping the $20.09 billion consensus. EPS was $3.38, which smashed the $1.62 forecast. Same store sales jumped by 24.3%, and that comfortably exceeded the 7.6% that economists were expecting. Digital comparable sales surged by 195%. The company’s stellar performance in the three month period should help the group with future investment, but the recent levels of growth are unlikely to be sustainable.

Lowe’s, like Home Depot yesterday, posted impressive quarterly numbers, as the company benefitted from a surge in demand for DIY items. EPS was $2.75, and that was much better than the $2.95 expected by equity analysts. Revenue rose by 30% to $27.3 billion, topping forecasts. The group’s online operation saw a 135% rise in sales. Like other companies that operated through the health crisis, it was hit by an increase in costs – additional expenses were $460 million. Now that everyday life has returned to some sort of normality, Lowe’s sales in the next few quarters will probably cool.  

Apple’s market capitalisation hits $2 trillion. The tech giant has become the first $2 trillion US company. 

FX

GBP/USD was initially given a lift by the surprise jump in UK inflation. The July CPI reading was 1%, and that was a pleasant surprise as economists were expecting the level to remain at 0.6%. The core report, which is typically seen as a better indication of underlying demand rose from 1.4% in June, to 1.8% in July, and keep in mind the consensus estimate was 1.3%. We have seen examples of pent-up demand being released as the economy has reopened. DIY items, bicycles, ice-cream and haircuts all saw price increases. The positive run in the pound didn’t last long as traders banked their profits from yesterday, when it hit an eight month high.

There were no surprises with the eurozone inflation data as the headline CPI reading was 0.4%, and the core metric was 1.2%. The reports were unchanged from the flash readings, and both met economists’ forecasts. EUR/USD is in the red due to the firmer US dollar.

Commodities

Gold has retreated from the one week high that was achieved yesterday. Lately, gold has been helped by the slide in the US dollar, and seeing as the greenback’s has pushed higher today, it would appear that is a factor in the metal’s negative move. Less than two weeks ago, the yellow metal set a record high, so the broader bullish trend is still intact.    

Copper hit its highest level since June 2018. The red metal is usually seen as a good indicator for the health of the world economy as it is typically used in manufacturing.

WTI and Brent Crude are in the red but the energies were jolted higher by the EIA report which showed that US oil stockpiles fell by 1.6 million barrels, which was shy of the 2.6 million barrel draw that traders were expecting. Gasoline stockpiles dropped by 3.3 million barrels. The fall in energy stockpiles points to more robust demand. Traders will be keeping an eye out for OPEC+ headlines, as the group is meeting today.   


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