The FTSE 100 is the best performing major European index today thanks to the rally in oil stocks. 

Europe

The British equity benchmark has a disproportionally large exposure to the energy sector, and the pickup from BP and Royal Dutch Shell has made it the standout market in Europe. The US withdrawal from the Iranian nuclear deal has sent the oil market to new multi-year highs, and the major oil titans are reaping the rewards.

Vodafone shares are in demand after the company stated it is acquiring assets from Liberty Group, worth £16.1 billion. The transaction needs approval from regulators, but if it goes ahead Vodafone will take over assets in Germany, Hungry, Romania and the Czech Republic. The fractured state of the European telecoms market has given Vodafone motivation to go on the acquisition trail, as it would be able to offer more competitive deals to consumers. Vodafone foresees €1.5 billion worth of synergies from the transaction. Vodafone’s share price is up 0.9% today and if it clears the 200-day moving average at 216p, it could target 230p.

Belgian billionaire Albert Frere announced he is selling his 6.6% stake in Burberry, and this has put pressure on the stock. Mr Frere didn’t give a reason for the disposal, but given the size of the transaction, it has sent out a few shockwaves. At the start of the year Burberry announced a 2% increase in third-quarter comparable sales, and the fashion house reaffirmed its end-of-year outlook. Shares in Burberry have rallied over 25% since the lows of February, so it may just be a matter of timing for Mr Frere. 

US

The major US equity markets are all higher but not by much. Even though President Trump fulfilled his promise and withdrew from the Iran agreement, traders are still a little on the cautious side. The general geopolitical mood has failed to improve and investors still aren’t overly optimistic.

US PPI slipped in April to 2.6%, from 3%, with economists expecting 2.8%. Even the core reading dropped to 2.3% from 2.7%, and the consensus was for 2.4%. The core figure underlines the decline in demand and this could lead to weaker consumer demand. Traders still remain divided over whether the Federal Reserve will hike interest rates two or three more times this year, and today’s report muddies the water.

FX

EUR/USD has been lifted by the pullback in the US dollar. The euro was weaker this morning in light of the disappointing French industrial production numbers. In March, industrial production dropped by 0.4%, while economists were expecting an increase of 0.4%. This paints a picture of declining economic momentum in the eurozone. The saving grace for the single currency is the dip in the greenback.

The US dollar index hit yet another high for 2018 this morning before profit-taking set in. The softer-than-expected US PPI number pushed the greenback to a session low, as inflation may cool. If factory prices are slipping, we could see costs for consumers slide too.

USD/CAD declined on account of the broad US dollar sell-off, and the impressive Canadian building permits report compounded the move. Building permits in March jumped by 3.1%, which was a healthy number as economists were expecting an increase of 2%. 

Commodities

Gold has been lifted by the sell-off in the US dollar. The metal is still above its 200-day moving average at $1,305, and while its holds above that metric its outlook is likely to remain positive. Gold has largely been range-bound in recent months and the $1,350 region appears to be the top end of the range.

WTI and Brent crude oil hit new 42 month highs as traders are fearful that supply will be impacted on account of the US withdrawing from the Iran deal. The US is looking to reintroduce sanctions on one of the largest oil producing nations in the world, so that is fuelling the buying.

The oil market was already bullish today, and the energy information administration figures showed that oil and gasoline stockpiles in the US fell by more than expected. Traders were anticipating a 1 million barrel decline in oil inventories, but it dropped by 2.19 million barrels.

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