Stocks are muted going into the close as some traders are stilling on their hands in advance of the Federal Reserve interest rate decision at 7pm (UK time), which will be followed by the press conference 30 minutes later.

Europe

The mood today has been one of cautious optimism, as the US central bank are tipped to lower interest rates, but seeing as the US economy is in good shape, there is the possibility the update won’t be as dovish as expected. Recently, the European Central Bank over promised, and undelivered in relation to its latest update, so it is possible the Fed might do a similar move. To a certain extent, the dust has settled in relation to the attack in Saudi Arabia, hence why traders are a little more confident about being stocks.   

Pendragon posted first-half pre-tax loss of £32 million, which compares with the £28 million profit a year ago. The firm blamed a lack of consumer appetite and uncertainty in relation to Brexit for the poor performance. Economic reports and company updates from retailers of all manner of businesses, are largely showing softer sales as consumers are cautious. The firm found itself with a stockpile of second-hand cars, so they decided to offer discounts, hence why the company swung to a loss. To make matters worse, Pendragon issued a less-than-optimistic outlook as the company predicts that trading will be challenging.

Kingfisher is four years into a five restructuring plan, but the company registered a 6.4% fall in first-half profit. In recent years, the French operation held the company back, which is still the case, as the unit saw a 12.7% decline in retail profit. On the bright side, Screwfix, the trade specialist in the UK, saw sales increase by 5.1% on a like-for-like basis. The UK construction sector is cooling, so the British business might come under pressure in the near-term. Thierry Garnier will take over as CEO later this month, so traders will be waiting to hear his thoughts on the outlook for the group, as the possibility of the company being broken-up has resurfaced today.

US

Stocks are fractionally lower ahead of the Fed update. The Dow Jones is slightly above the 27,000 mark, while the S&P 500 is shy of the 3,000 mark. Volatility is tipped to be low on the run up to the announcement from the US central bank. There is talk of a 25 basis point rate cut, but some traders feel it will be accompanied by neutral language, which would signal an adjustment. Some dealers are expected the Fed to lay the ground work for a series of rates, but keep in mind the jobs market is robust, plus wages are impressive, so a very dovish update is not a done deal.     

FedEx posted poor first-quarter numbers last night. EPS declined by more than 11% to $3.05, which undershot the $3.15 consensus estimate. Revenue was broadly unchanged in addition to being largely in line with expectations. The group cited the US-China trade conflict as well as the ending of a contract with Amazon for the disappointing update. The company lowered the annual guidance too, which compounded the impact on the stock, which is down XXX%. The company is seen as a good gauge of demand as they are in the parcel delivery business, so the under whelming update could point to a slowdown in consumer activity.

FX

GBP/USD is lower on the session, partially because of the firmer US dollar, also partially because of the weaker UK CPI data. The British CPI rate dropped to 1.7% from 2.1%, plus the core reading slipped to 1.5%, from 1.9%. The updates point to a sizable fall off in demand, which might be on account of the uncertainty in relation to Brexit.

EUR/USD has also been hit by the move higher in the US dollar. The final reading of euroozone CPI was 1% in August, plus the core reading was 0.9%. Demand in the currency bloc is clearly low, hence why the European Central Bank cut rates even further into negative territory last week, as well as announcing a stimulus package.       

Commodities

Gold is in demand this afternoon going into the Fed meeting. The central bank are tipped to lower interest rates, but traders are divided over how dovish the message will be, which is likely to add volatility to the market in the wake of the announcement. Should the US central bank go down the dovish route, the metal might drive higher, but the use of more neutral language might send the metal back through $1,500.

Oil is off the lows of the session after the Saudi military said the recent drone attacks were unquestionably sponsored by Iran. Seeing as the Saudi Arabian government has invited the UN to investigate the attack, volatility is likely to taper off, as the oil rich nation appears to be going down the political route. The Trump administration will ramp up sanctions on Iran in light of the attack.      

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