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The FTSE 100 has retreated from the multi-week high that it reached yesterday. 

Europe

Oil giants Royal Dutch Shell and BP are weighing on the British equity benchmark. Geopolitics are playing a role too, as the sanctions that the US imposed on Russia have added to the already uneasy global mood.  

G4S shares are in the red after the company revealed a 7.5% fall in first-half revenue, and earnings dropped by 10.5%. The company cited adverse foreign exchange movements and restructuring costs for the drop in profit. The firm derives the bulk of its revenue from outside the UK, and it had a strong performance in India and the Middle East. The group has landed £700 million in new contracts so far this year. The rebound in the oil market is likely to see high demand from Middle Eastern states in the second-half of the year. G4S is aiming to save between £90 million and £100 million by 2020.  The stock hit an all-time high in July 2017, but since then it has been moving lower, and if the negative move continues it could target 250p.

AA confirmed it is on track to achieve its full-year earnings target of between £335 million and £345 million. It is impressive that the firm is still on track to achieve its target considering the ‘Beast from the East’ contributed to a significant jump in breakdowns. The group revealed a 7% rise in motor policies, also meeting forecast. The stock has been in decline since March 2015, and if the bearish move continues it could target 100p.

Cineworld shares have jumped after the firm confirmed that the integration of Regal Entertainment is going well, and the group revealed a robust set of first-half numbers. On a pro-forma basis, revenue jumped by 10.8% and earnings increased by 14.1%. The firm now derives approximately 70% of its revenue in the US, and the American operation saw a 14.3% jump in pro-forma revenue. Cineworld has expansion and refurbishment plans, and it has negotiated a better deal on its debt facility. The share price has hit its highest level since late November – when the Regal takeover was first mentioned – and if the bullish move continues it could retest the 325p area.    

US

The NASDAQ 100 is edging higher and isn’t too are far from retesting its all-time high. The tech-focused index has been the best performer of the major US indices. The Dow Jones and S&P 500 have experienced low volatility, but both have been broadly pushing higher recently. 

The jobless claims rate slipped to 213,000, from 219,000, and economists were expecting a reading of 220,000. Keep in mind, the 207,000 reading in mid-July was the lowest in decades, so the US labour market is clearly strong.

The US PPI and core PPI rate rates were 3.3% and 2.7% respectively. Both reports showed small declines on the previous months. It indicates that there is a slight dip in demand. It is worth noting that last month’s PPI and core PPI reports were the highest in years, so a slight pullback isn’t a surprise.  Tomorrow, traders will be keeping an eye on the inflation report.    

FX

There were no major economic announcements from the UK today, and short covering and bargain hunting pushed GBP/USD higher. When you consider how much ground the pound has lost in recent sessions, today’s upward move is tiny – this highlights the negative sentiment surrounding the pound. Currency traders are terrified of the prospect of the UK leaving the EU without a trade deal.

EUR/USD hasn’t moved much today, but remains in its recent downtrend. We are not expecting any major economic announcements from the eurozone this week, so the currency pair will be US dollar driven. A break below $1.1510 area could pave the way for further losses.

Commodities

Gold is largely unchanged today despite the firmer US dollar. Lately, gold and the US dollar have enjoyed a strong inverse relationship, but today is not one of those days. The commodity has risen a little in the past few sessions, but it remains firmly in a downtrend. The inflation report from the US tomorrow will be closely watched, and a strong figure could spur on the US dollar and potentially hurt gold.

WTI and Brent crude oil have recovered a little following yesterday’s severe sell-off. Some traders swooped in and picked up oil as it is relatively cheap today, but there is still a lot of uncertainty surrounding its prospects. The Energy Information Administration report yesterday, pointed to a fall a fall in US demand. Traders are also concerned about China’s demand, given the country is locked in a trade spat with the US.

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