The bullish sentiment is doing the rounds as traders are not afraid of a full-on war between the US and Iran.

Europe

Relations between the two counties are still poor, but traders only really care about the prospect of a war, which now seems to be very low. President Trump made it clear yesterday that he doesn’t want to start a conflict with the Iranian regime, and that acted as a cue from buyers. The FTSE 100 is underperforming as it has yet to take out its recent highs, while the DAX 30 printed a level last seen in January 2018.    

Marks and Spencer shares endured a sizeable decline on the back of the company’s latest update. The trading statement covered the Christmas period and the clothing department continues to hold the group back. On a like-for-like basis the clothing and home division posted a 1.7% fall in sales, by contract, the food business saw a rise of 1.4%. This has been a common theme for M&S for many years. The retailer will struggle to get ahead while the clothing and home unit continues to underperform, so the unit needs to whipped into shape or possibly spun-off.

Tesco’s update showed the company continues to tick-along. The group’s trading statement revealed that total sales in the 19 weeks until early January slipped by 0.9%. The Booker unit posted an increase of sales that topped 4%, while the UK and Ireland business revealed a 0.4% rise in revenue – both metrics were on a LFL basis. The retailer’s CEO, Dave Lewis, feels the company is performing well in a ‘subdued’ market.

Galliford Try had a tough time in 2019 as a profit warning hurt the share price, but 2020 has started on a positive note. Last week, the group completed the sale of its house building division – Liden homes, for more than £1.1 billion. The firm spun-off Linden in a bid to get back to basics, and today’s update showed the company has been awarded new contracts. The order book now stands at £3.2 billion, so it seems the firm has turned a corner.  

US

The Dow Jones and S&P 500 racked up fresh all-time highs as the bullish sentiment continues. The measured response from President Trump in relation to Iran yesterday has encouraged traders to buy back into stocks. The optimist mood is likely to hang around seeing as a war with Iran seems to be off the cards. The jobless claims report was 214,000, while traders were expecting 220,000. It ties in with the solid ADP report from yesterday.     

Bed Bath & Beyond shares are sharply lower in the wake of the company’s disappointing third-quarter update that was announced last night. The company posted a loss per share of 38 cents, which was a big miss when compared with the 2 cents profit that traders were expecting. Same-store-sales is a closely watched metric, and it fell by 8.3%. The struggling retailer anticipates a ‘pressured’ fourth-quarter, but it plans to announce a new strategic vision in the near-term.

Kohl’s cautioned that full-year earnings will be at the lower end of the previous guidance range of $4.75-$4.95. Bank of America Merrill Lynch lowered its rating on the stock to ‘neutral’ from ‘buy’, plus the bank cut its price target to $50 from $55.  

FX

EUR/USD is largely flat despite the mixed figures from the eurozone. The jobless rate in the currency bloc remained at 7.5%, meeting expectations. German imports and exports fell by 0.5% and 2.3% respectively. Both components of the trade update point to weaker demand. 

USD/CAD was given a nice lift by the respectable US jobs numbers, and the softer-than-expected housing data from Canada impacted the currency pair too. The housing starts came in at 197,300, missing the forecast of 210,000. The building permits fell by 2.4%, which was a big miss compared with the 1% growth forecast. If the move higher continues it might target the 1.3110 region.          

Commodities

Gold is down on the day following the de-escalation of US-Iran tensions. Traders are in risk-on mode, hence why we have seen record highs on the Wall Street, and in turn dealers are dumping the metal. Gold has traditionally suffered when stocks rally, and that old habit is playing out today. Should the recent negative move continue it might target the $1,530 area.

WTI plus Brent crude are showing small loss today now that fears of a war between the US and Iran have subsided. The energy slumped yesterday on the back of the update from Donald Trump, which made clear the he wasn’t pressing for a full-on conflict with Iran, and that bearish sentiment is still lingering. Keep in mind, that oil rose sharply this week when the political climate was more hostile.  

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