Stocks are higher heading into the close as traders have gotten over the mixed update from the European Central Bank yesterday. 

Europe

The prospect of a rate cut in September is still on the table and traders are snapping up relatively cheap stocks. Yesterday acted as a speed bump, and today dealers are reshaping their outlook, which remains broadly positive.   

Vodafone shares have surged today on the back of the news the company is considering disposing of some of its European Tower Business .The telecoms group might carry out the disposal through an IPO, and the cash raised from such a transaction might be used to lower the debt position. The company’s performance in the first-quarter was respectable. Organic service revenue dipped by 0.2%, but the firm expects it to improve in the remainder of the year. In the mobile division, the churn rate dropped to 0.6% on an annual basis, which was yet another record low, and it indicates that customers are clearly happy with the service.

Pearson’s drive to digital learning has paid off as adjusted profit for the first six months increased by 35% to £144 million, topping forecasts. Revenue edged up by 2%, and that also exceeded forecasts. Adding to the bullish news, the group upped its full-year adjusted EPS guidance to between 57.5p and 63p, while the old guidance was between 55.5-61p. The group’s restructuring strategy is clearly paying off, and now the bulk of the revenue comes from the digit side of the business.           

Traders are still awaiting the results from Sports Direct and the fact the firm has had a number of delays to the announcement has chipped away at the share price.   

US

Stocks are broadly higher after the strong GDP report.  The US economy grew by 2.1% in the second-quarter, and this ties in with the robust labour market, the respectable growth levels, and the solid durable goods reports. The calls for lower rates seem even stranger in light of the growth report. The US central bank seems to be more Trump dependent than data dependent. Some aspects of the economy, like manufacturing, are soft but by and large it is in good shape, and the expectations for a reduction in the interest rate seem to be as a result of Mr Trump’s demands.

Earnings season continues and we heard from a number of big firms in the past 24 hours. Amazon’s cloud business continues to grow at an impressive rate – it posted a 37% increase in second-quarter revenue, but the growth rate was slower on the quarter, and it also undershot forecasts. Group revenue topped forecasts. An increase in investment in the Prime Service weighed on profit margins, and the third-quarter net income forecast was below forecasts, but the stock is only a small bit lower on the day.

Google’s owner, Alphabet, revealed impressive numbers last night. The latest quarterly revenue was $14.21, and that comfortably exceeded the $11.30 consensus estimate. Revenue was $38.9 billion, and that was slightly above forecasts. Traffic acquisition costs undershot forecasts fractionally, and paid click on Google properties from the second-quarter of 2018 until the second-quarter of 2019 jumped by 28%. The stock rallied today.

Twitter shares are in demand as group confirmed that monetizable daily active users in the second-quarter jumped by 14% to 139 million. EPS was 20 cents and revenue was $841 million respectively, while traders were expecting 19 cents and $829.1 million respectively.      

FX

GBP/USD has been hit by the firmer US dollar – the solid US GDP reading was the driver of the greenback. The intense chatter about the Fed cutting rates next week, has put pressure on the US dollar, and today’s growth has seen traders snap up the US dollar. EUR/USD also suffered on account of the dollar’s dominance. This morning, German import prices fell by 1.4% and the decline is likely to keep inflation subdued, which increases the change of the European Central Bank of cutting rates in September.  

Commodities

Gold is higher on the session but volatility remains low. The metal has broadly drifted lower in the past week after reaching a fresh six year high last Friday. The metal’s wider bullish trend is still in intact, and while it holds above the 1,400 mark, the wider positive should continue.

Traders continue to tread lightly in the oil market as tensions in relation to Iran persist. Concerns about logistics in the Gulf of Oman are playing on traders’ minds, as are the falling stockpiles levels in the US, but those supply worries are being counteracted by demand woes in light of the poor manufacturing sectors around the world.  

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