Traders are buying up stocks ahead of the release of the minutes from last month’s Fed meeting, and the update will be released at 7pm (UK time). 

Europe

In late July, the Fed cut rates, and dealers are banking on dovish language in the report, which might signal further rate cuts this year. Since the rate cut, the global macroeconomic mood has soured – US-China trade tensions, the UK and Germany saw negative growth, and increased unrest in Hong Kong.  

Fiat Chrysler and Renault are reported to be back in merger talks. The French government is the largest shareholder in Renault, and it holds a 15% stake in the group. Merger talks collapsed in June, and it was believed the French government’s concerns about operations in France caused the discussions to come to an end. The prospect of M&A activity in the sector has lifted car manufactures across the board.

Pandora shares are still benefitting from the positive second-quarter figures that were posted yesterday. RBC raised their price target for the stock to DKK255 from DKK219. Pandora’s CFO, Anders Boyer, acquired nearly $900,000 worth of stock in the group. The luxury sector across the board is higher.       

Ryanair won a legal battle to prevent Ireland-based pilots from going on strike tomorrow and Friday. The announcement initially helped the share price, but the market has turned over on itself. Todays’ ruling is a short-term victory for the airline but the underlying issue of dissatisfied staff will probably come back to haunt the airline. Poor industrial relations, softer consumer confidence, and the pilot roster fiasco in 2017 have hurt the share price – which last week hit its lowest since last 2014. The firm needs to rebuild its relations with staff if it wants to rebuild its relationship with its customers and shareholders.         

OneSavings Bank revealed a respectable set of first-half figures as underlying pre-tax profit grew by 6%, and the loan grew book by 10%. Net interest margin slipped to 278 basis points from 301 basis points, and given the sharp drop in UK government bond yields, that metric is likely to fall further. The bank warned it will tighten its lending criteria on account of the ‘macroeconomic outlook’ and that played on traders’ minds, and the stock is in the red.        

US

Stocks are pushing higher in advance of the Fed minutes. The bullish momentum is frim as traders are hoping the Fed minutes will include hints about further interest rate cuts, but seeing as the latest US inflation and retail sales reports have been strong, the bulls might be in a for a shock.    

Target shares open at a record high as second-quarter EPS came in at $1.82, which easily topped the $1.62 forecast. Total revenue edged up by 3.6% to $18.42 billion, and the consensus estimate was $18.34. Same store sales is a closely watched metric, and it jumped by 3.4%, while traders were only expecting a 2.9% increase. Not only did the retailer post solid figures for the second-quarter it upped the full-year EPS guidance to between $5.90 and $6.20, which was an improvement on the previous guidance of $5.75-$6.05.

Lowe’s shares have opened higher also on the back of solid second-quarter results. Revenue edged up to $20.99 billion, which was slightly ahead of forecast. EPS was $2.15 and that easily exceeded the $20.01 estimate. Same-store sales increased by 2.3% and that topped the 1.9% that traders were expecting. There has been a lot of talk about the US economy heading for a recession, but the latest US retail sales update, combined with the reports from Home Depot, Target, and Lowe’s        

FX

USD/CAD took a knock in the wake of the on the back of the solid Canadian inflation figures. The CPI rate held steady at 2%, while economists were expecting it to fall to 1.7%. The core inflation reading also remained at 2%. The updates point to firm demand in Canada, and that gave the Canadian dollar a boost, and that might encourage the Bank of Canada to keep rates on hold next month.

GBP/USD is lower today as the same old Brexit worries are hanging over the pound. Sterling gave some of the gains that were made yesterday, but it is still well above the lows of last week, so traders might be getting used to the idea of a no-deal Brexit seeing as it appears we are heading in that direction.                

Commodities

Gold is lower today as traders are in risk-on mode, and traders are dumping assets like gold for riskier products such as equities. The metal is lower on the day, but it remains in its wider upward trend, and even if it drops below the $1,500 mark, support might be found at $1,488.

Oil was given a lift by the Energy Information Administration report which showed a drop in inventories of 2.73 million barrels, while dealers are only expecting a draw of 1.88 million barrels. The wider positive sentiment in equities is helping oil too as concerns about the global economy was dipped for now.  

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