Concerns about political stability in Italy has weighed on the FTSEMIB, and it caused instability in others European indices too. 

Europe

It was reported the joint deputy Prime Minister Matteo Salvini of the Lega Party would meet with Luigi Di Maio of the Five Star Movement, who is the other joint deputy Prime Minister. The two coalition partners have had their disagreements, and there has been speculation the two sides would end the political partnership, and call a new election.

Publicis had a weaker-than-expected second-quarter, and that prompted the group to cut its full-year forecast. The likes of Publicis and WPP have lost out to the rise in online advertising. Google and Facebook have scooped up a lot of business from traditional advertising agencies like Publicis.     

Close Brothers Group shares are in the red as traders were a little worried about firm’s lending division. The loan book grew by 5.1%. The net interest margin was 7.8%, which cooled from 8% last year. In light of the uncertainty from Brexit, gilt yields have been under pressure, and like many of its peers it is finding it harder to make money in the lending market. The outlook for lending business isn’t too hot either as the political uncertainty is unlikely to lift anytime soon ,and margins wil probably be squeezed.

US

The major indices are slightly higher this afternoon as traders remain hopeful the Fed will lower rates at the end of this month. Yesterday, Fed member, Richard Clarida, said the US central bank should assist the economy in advance of a slowdown. The remarks from Clarida shows the Fed willingness to loosen rates even when the economy is in good shape. The University of Michigan consumer sentiment survey was 98.4, which was slightly below forecasts.             

Microsoft posted impressive numbers last night. Fourth-quarter EPS came in at $1.37, which exceeded the $1.21 forecast, and revenue jumped by 12% to $33.72 billion, and it was the ninth consecutive quarter of double digit revenue growth. The cloud business, Azure, continues to be the star performer, as revenue jumped by 64%. In terms of cloud market share, Microsoft are well behind that of Amazon Web Services, and no doubt that is an area of business when are keen to grow. Global PC sales grew by 15% in the second-quarter, as there is demand for Windows 10, as Windows 7 support will cease in 2020. Microsoft is the fifth largest PC vendor in the US and an increase in PC sales will be a nice add-on for the group. The stock hit a fresh record-high today.

Last night, Boeing confirmed that it will take a $4.9 billion hit in relation to the grounding of the 737 Max. In advance of the announcement, analyst were expecting the company to post EPS of $1.80, and the massive write-down is expected to wipe out group profits.  

FX

USD/CAD is higher on the on the back of the poor Canadian retail sales and the firmer US dollar. The greenback pulled back some of last night’s losses ,and Canadian retail sales report in May dropped by 0.1% ,while economists were expecting an increase of 0.3%.

GBP/USD is in the red due to the dollar’s rebound and the UK public sector net borrowing figure surged in June, and that was a factor in the pound’s sell-off too. Net borrowing came in at £7.2 billion, up from £3.3 billion, and the level was the highest since June 2015.          

Commodities

Gold printed a fresh six-year high overnight on the back of the sell-off in the greenback, but both have reversed some of their previous moves. The metal has come back a little, but while it holds above the $1,400 mark, the wider upward trend should remain intact. 

Oil is slightly higher today on the back of political tensions in relation to Iran. The US military downed a drone in the strait of Hormuz, and there have been some reports the US downed one of its own drones. Nonetheless, tensions in the region are high, and that is likely to act as a floor for the energy market.    

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