market falling stocks lower bear market

The FTSE 100 and DAX are in the red, and the CAC 40 is drifting lower as trade concerns weigh on sentiment. 

Europe

Traders are worried that we are edging towards a trade war, and are cutting their equity positions. Volumes and market volatility are low as the US stock markets are closed for the Independence Day holiday. 

Sainsbury’s shares are in demand after the company announced it secured £3.5 billion in funding for the planned merger with Asda. The UK supermarket sector remains competitive, but Sainsbury’s believe the merger will create a new dynamic player in the UK retail sector. In the first quarter, total retail sales excluding fuel, jumped by 0.8%, but on a like-for-like basis only increased by 0.2%. The supermarket revealed a 7.3% and 3.6% jump in online grocery and convenience sales respectively. This indicates the company is adapting to changing shopping patterns. The stock has been rising since March, and if the positive move continues, it could target 244p.

Vedanta Resources have suggested a merger with Anglo American. Earlier this week, Vedanta’s founder and majority shareholder, Anil Agarwal, made a bid to acquire the remaining stock in the company that he does not own. It was speculated that Vedanta would seek to merge with Anglo American, as the pooled resources would create a well-diversified mining giant. Anglo American shares have been in an uptrend for a year, and if the bullish trend continue could target 1,800p.

Copper has tumbled amid the trade tensions surrounding China. The second-largest economy in the world is a major importer of copper, and traders are fearful China’s appetite for the red metal will wane on account of the trade spat with the US. The drop in copper has hurt mining companies like Rio Tinto and BHP Billiton

US

US equity markets are shut today due to Independence Day.

FX

GBP/USD was given a boost on the back of a stronger-than-expected services report. The UK services PMI report for June came in at 55.1, which easily topped the consensus estimate of 54. It is worth noting that the pound didn’t make much more headway against the US dollar after the initial jump higher.

EUR/USD drifted lower today as mixed services data from the eurozone failed to entice buyers. The service reports from Spain and France fell below economists’ forecasts, while the Italian and German updates topped forecasts. This currency bloc is going through an economic soft patch, and the differing reports underline this.

Commodities

Gold has pushed higher owing to short covering ahead of tomorrow’s US Federal Reserve update and the non-farm payrolls report on Friday. Yesterday, the metal fell to yet another six-month low, and now it has popped higher as short sellers cover their positions. The US central bank will release the minutes from June’s meeting tomorrow, and traders will be wondering how many more rate hikes there will be in 2018.

WTI and Brent Crude oil are experiencing low volatility today on account of the US holiday. Yesterday, the American Petroleum Institute report revealed a 4.5 million barrel decline in inventories, while the consensus estimate was for a 3.2 million barrel decline. The oil markets remains in a solid upward trend, and traders will be looking ahead to the Energy Information Administration report tomorrow. 

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