Equity markets in Europe have been drifting lower this afternoon as a lack of positive news has weighed on the indices. 

Europe

The firmer euro has chipped away at the solid start the eurozone markets got off to this morning. The single currency is in demand due to hawkish remarks made by European Central Bank (ECB) policy makers yesterday. 

House of Fraser announced that 31 of its 59 stores could close. A difficult trading environment, adverse foreign exchange movements, poorly located stores and higher business rates were blamed for the poor performance. Many firms operating in the retail sector are struggling. In April, profit warnings from retailers hit a seven-year high. House of Fraser has filed for a company voluntary arrangement (CVA), which needs to be approved by creditors, but this would give the company some much needed breathing space. A CVA could see landlords reducing their rent, and this could lead to fewer job losses. The changes could impact 2,000 jobs directly, and a further 4,000 jobs indirectly.

Trading began at 9am this morning on the London Stock Exchange – an issue with pricing data was cited for the setback. The share price of the company is lower, and it managed to reach a fresh all-time high in early trading.  

Auto Trader shares are in demand after the company revealed a respectable set of full-year numbers. Revenue and profit jumped by 7% and 10% respectively. The figures were just shy of analysts’ forecasts, but the market has reacted positively to the update. The firm blamed economic uncertainty for a decline in private listings, and foresees a continuation of the trend. The stock has been largely pushing higher since the end of last year, and if the positive move continues it could target 400p.

Kier Group confirmed it is teaming up with Homes England and Cross Keys Homes to build 5,400 homes in England over the next 10 years. Kier Group will account for 69% of the joint venture, but it only holds 50% of the voting rights. The project will focus on tackling the affordability issue, building homes in areas with a housing shortage, and tapping into the local workforce. The stock is in the red this afternoon.

US

The Dow Jones and the S&P 500 both hit levels not seen since mid-March. The major US indices have been broadly moving higher in recent weeks, and now there is a clear series of higher highs and higher lows.

Wilbur Ross confirmed that the US has reached an agreement with China’s ZTE. The company will have to pay a fine of $1 billion and employ a compliance team selected by the US. The agreement is seen by traders as an improvement in the relationship between China and the US, which might speed up trade talks.

FX

EUR/USD is higher today as the single currency is still benefiting from the hawkish comments made by two ECB policy makers yesterday. Peter Praet foresees higher wage growth and in turn a rise in inflation, while Jens Weidmann confirmed it is ‘plausible’ that the ECB could wind down the stimulus package this year.

GBP/USD had a positive start to the session but mixed housing data from the UK, coupled with political uncertainty, has led to major volatility in the pound. According to Halifax UK house prices grew at a slower pace in the three months until May when compared with the same period last year. While on a monthly basis, house prices rebounded in May. Speculation of in-fighting in the Conservative party around the Brexit ‘backstop’ arrangement has also pushed the pound around. 

Commodities

Gold is marginally higher because of the softer US dollar. Recently the metal has struggled to break above $1,307, the 200-day moving average. The Federal Reserve is widely expected to hike interest rates next week. The metal might remain subdued until traders have a clearer picture about the Fed’s outlook for the rest of 2018.

WTI and Brent Crude has been driving higher today. The oil market has rebounded from the sell-off yesterday on the back of the latest inventory data. The report from the Energy Information Administration showed an unexpected increase in oil inventories, and a bigger-than-expected build in gasoline stockpiles.

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