Stock markets in Europe have had a good run today as investors are now less fearful of a global trade war. 

Europe

The US has decided to suspend its plans to impose tariffs on $150 billion worth of Chinese imports, and in exchange Beijing is planning on significantly increasing its purchases of US goods. The move has reassured investors, and helped the FTSE 100 hit a record high, while the CAC 40 has notched up a new 10-year high on account of the positive sentiment in equity markets.

Ryanair shares are flying high after the company announced solid figures. Full-year revenue and profit jumped by 7% and 10% respectively. The load factor was 95%, and passenger numbers rose by 7%. The airline issued a less than rosy outlook, and predicted next year’s profit will be in the region of €1.25 to €1.35 billion, compared with this year’s €1.5 billion. The relatively gloomy forecast initially sent the stock lower, but it has managed to drive higher.

AstraZeneca received a boost from the Food & Drug Administration in the US, as the regulator approved their drug for Hyperkalemia. The European regulator gave the green light to its approval two months ago. On Friday, the stock dipped after it warned that sales of its profitable cholesterol drug, Crestor, was coming under pressure from generic brands. Today’s update pushed the stock to an 11-month high. 

UK homebuilders are higher today after Rightmove stated that UK average house prices ticked up by 0.8% to £308,075 – a record high.  Average prices might be moving higher, but sales have dropped by 5%. London and south-east England saw average house prices fall by 0.2% and 0.1% respectively. The remainder of the country largely experienced price increases, as seven of the 11 regions saw prices rise. Shares in Bovis Homes, Taylor Wimpey and Persimmon are all higher today. 

US

Equity traders welcomed the news that Washington DC has put its plans to impose tariffs on Chinese imports on hold. The announcement pushed US stock markets higher. The Dow Jones hit a multi-month high and the Russell 2000 has reached another record high.

US Chicago Fed national activity in April came in at 0.34, up from 0.32 in March. The latter figure was revised higher from 0.1%. This adds weight to the argument that the US economy is still expanding. The minutes from the Federal Reserve meeting on Wednesday will provide clarity about future monetary policy.

The perception the Fed will hike interest rates three more times this year is being helped by the news the US is suspending its planned imposition of tariffs on Chinese goods. Traders were worried a trade war would break out, and that it could have derailed the Fed’s hiking cycle.

FX

The US dollar index hit a fresh five-month high this morning on the back of the US-Chinese trade news, but the greenback has slipped due to profit-taking. Outside of the positive Chicago Fed activity index, there were no other economic announcements from the US today. The Fed minutes on Wednesday will be closely watched as currency traders have hawkish hopes for future policy changes.

EUR/USD fell to its lowest level since December earlier today, before recouping some of the lost ground. The greenback continues to be the dominant player in currency markets, especially as there were no major economic announcements from the eurozone today. The single currency has been in a downtrend against the US dollar for a month, and we haven’t seen any signs of a turnaround yet.

GBP/USD broke below the recent lows this morning and also fell to a new five-month low. Sterling was also at the mercy of the US dollar. The UK revealed strong housing price data, but it failed to impress dealers. While the currency pair remains below the 200-day moving average at 1.3560, its outlook is likely to remain negative. 

Commodities

Gold is still under pressure due to the rise in the US dollar. The inverse relationship between gold and the US dollar continues, and the metal fell to a fresh five-month low today. The possibility of the Fed speeding up its monetary tightening policy is also a factor that is pushing the metal lower.

WTI and Brent Crude oil have drifted away from the 42-month high that was reached last week. Supply concerns in light of President Trump’s decision to withdraw the US from the Iranian nuclear deal still persist. The relatively high price has encouraged others to keep production levels high. According to Baker Hughes, the number of active rigs in the US remained unchanged last week – after six weeks of gains.

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