Traders are tetchy over tensions surrounding the US, Russia and Syria, with the possibility of the US launching missiles in Syria causing concern. 

Europe

Equity markets are off the lows of the session, but sentiment is from bullish. 

Tesco shares are in demand after the company announced annual profits that topped estimates. The retailer revealed full-year profits of £1.3 billion, while traders were predicting £1.1 billion. Tesco is still trimming costs, and once Brooker Group is fully integrated into the business it will produce synergies of £140 million over the next two years. Revenue increased for a ninth consecutive quarter, and that is a major accomplishment given the difficult consumer environment. A total dividend of 3p was announced – its first full-year dividend in nearly four years. Net debt and the pension deficit were reduced too. The share price has been rising since June 2016, and if it can hold above the 220p mark it could target the 250p area.

Investors didn’t take kindly to the news that ASOS are ramping up their capital expenditure. The online fashion house revealed a 10% jump in profits, while revenue increased by 27%. The rest of the world is outperforming the UK in terms of sales growth. Strong demand outside of their main market will bode well for the company. ASOS intends to increase capital spending by between £230 million and £250 million over the next two years –underlining its bullish outlook. The stock gapped lower today, but if it holds above 6308p (the 200-day moving average) its outlook may remain positive.

US

Traders are exiting US equities after the rhetoric from President Tump in relation to Russia and Syria. Mr Trump warned Russia to ‘get ready’ for missile strikes in Syria, after it was alleged the Syrian government used chemical weapons on its own people recently. The message from Mr Trump to Moscow gave traders an excuse to lock in profits from last night’s strong finish. 

The US inflation rate continues to rise, after the March reading came in at 2.4%, up from 2.2% and meeting expectations. The core reading was 2.1%, which was an increase on the February reading of 1.8%. This tells us that demand in the US is picking up, which is a positive sign for the economy. The latest non-farm payrolls report showed that average earnings are rising too, and higher wages are translating into increased demand. 

Facebook shares are a touch lower today as CEO Mark Zuckerberg is currently testifying before US lawmakers. This is the second day Mr Zuckerberg is being questioned in Washington DC, and he is discussing regulation for social media. The Facebook CEO claims the company does not sell on client data to advertisers, and last night the stock had it largest rally in two years, but we are seeing some profit-taking today.

FX

The weaker US dollar is the biggest story on the currency markets. The greenback is under pressure as political uncertainty mounts over the US and Russian standoff. The tough talk from President Trump in relation to Syria has left trader nervous.

EUR/USD is higher on the day on account of the weakness in the US dollar. Italy revealed disappointing retail sales, but traders shrugged it off for as geopolitical issues take precedence. In February, Italian retail sales dropped by 0.6%, and that followed a 0.8% drop in January. This is further proof the eurozone is coming off the boil.

GBP/USD is also driving higher on account of the soft greenback. In February, British manufacturing output grew at a faster than rate than expected, while industrial output grew at a slower rate than forecast. Construction output contracted, which was in line with the negative reading on the construction PMI report last week.

Commodities

Gold continues to be driven higher by the weaker US dollar. The souring of relations between the US and Russia over Syria is prompting some traders to seek out traditional safe-haven assets like gold.

WTI and Brent Crude oil hit their highest levels since November 2014 as traders are concerned about heightened tensions in the Middle East. President Trump warned Russia they could begin launching missiles in Syria, and this has prompted fears about supply in the region.

Volatility jumped in the oil market when the Energy Information Administration released the latest inventory data. US oil stockpiles grew by 3.3 million barrels and gasoline inventories increased by 458,000 barrels, while the consensus was for a draw of 207,000 barrels and 1.1 million barrels respectively.

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