Equity markets in Europe had a slow start to the day but the small buying enthusiasm tuned into a sharp decline. 

Europe 

January saw record highs on the FTSE 100, DAX and CAC 40 but mood has soured and the traders are exiting equities.

The Caixin survey of Chinese manufacturing for January remained steady at 51.1, and it slightly exceeded estimates of 51.3. The second largest economy in the world has been cooling down, and an absence of a strong manufacturing sector has given traders an excuse to sell shares like Glencore, Anglo American and BHP Billiton.  

Royal Dutch Shell shares have been hit by profit taking even though the company posted solid figures. In the fourth quarter the firm posted profits on a current cost of supplies (CCS) basis at $4.3 billion, and that was a 140% improvement on the previous year’s figure, and it exceeded the forecast of $4.24 billion. It was hailed as a year of ‘transformation’ as cash flow greatly improved after it trimmed costs in the wake of its merger with BG in 2016. The share price is down 2.7% today but has been in a strong upward trend since January 2016, and the outlook remains positive.

Cranswick had a robust third-quarter and a strong Christmas period. The firm stated export sales are ‘well ahead’ of expectations and that capacity is going to be increased as investment in the business is being boosted. The stock is up 5.2% today and has been pushing higher since June 2016, and if the bullish move continues it could target 3400p.

Capita Group shares suffered a severe sell-off yesterday after the company issued a profit warning, suspended its dividend and declared its hopes to raise £700 million via a rights issue. The company lost over 40% of its value yesterday and it’s down another 12.3% today.

Vodafone shares are 4.8% lower after it revealed a 3.6% drop in revenue for the third quarter. The relatively weak quarter was attributed to the sale of its Dutch unit and tough competition in India.

US

US stocks are mixed today as the Dow Jones and S&P 500 are slightly in the red, while the NASDAQ 100 is currently posting small gains. The common theme across the stock markets is low volatility. February has begun on a relatively quiet note, especially when you consider many fresh record highs were posted last month.

Janet Yellen gave her last update yesterday as the chair of the Federal Reserve, and in keeping with her form, there were no major surprises. Interest rates were kept on hold, but there were signs of a more hawkish outlook seeping through.

The US jobless rate fell to 230,000 from 231,000, and that backs up the better than expected ADP employment report from yesterday. Investors will be focused on the non-farm payrolls report tomorrow.

FX

The US dollar has improved since this morning but is still in the red. The update from the Federal Reserve last night has gotten traders thinking about the possibility of an interest rate hike in March. Last night’s update revealed that inflation remains weak, but some of the base indicators are improving. Dealers are cautious about a rate hike in March.

EUR/USD is higher today as the weakness in the US dollar is boosting the single currency. The eurozone continues to post impressive economic indicators as Italian manufacturing hit a level not seen since March 2011. The French manufacturing industry is cooling a little from December, but that was a seven-year high.

GBP/USD has been helped by respectable UK economic updates and the dip in the dollar. UK house prices on an annual basis increased by 3.2% according to nationwide, which easily topped the 2.5% estimate.

Commodities

Gold is a touch weaker in the wake of Fed’s update last night. The metal hasn’t lost much ground today, but now that traders are weighing up the prospect of an interest rate hike in March from the US central bank, the commodity could start to come under pressure. Gold has been in an upward trend since mid-December, but if it were to break below 1326, it could turn over.

WTI and Brent Crude oil crept higher today as stronger commitment to the co-ordinated production cut by OPEC members is outweighing the increase in supply from the US.

America is now producing more than 10 million barrels per day – its highest level since 1970. The rise of the shale industry is behind the jump in oil production. The energy market has been in a solid upward trend since June and we have yet to see any signs of a turnaround.

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