European stocks are set to finish on a negative note as the early morning decline was compounded by the US jobs report. 

Europe 

Vodafone and Liberty Global are in talks to swap assets. The discussions are believed to be in the preliminary stage, but such a move could benefits both companies’ positions in Europe. Firms like Vodafone with a big wireless network and seeking to package together broadband services, and a firm like Liberty Global have well established fixed-line operations. If an agreements can be stuck it could boost profits at both businesses.

Deutsche Bank came are under pressure today after the firm revealed a larger than anticipated annual loss, which was €497 million, and the consensus was for €290 million. Alternations to the US tax laws forced the tax to set aside a one off charge of €1.4 billion – which forced the bottom line in to the red. The relatively weak volatility in financial markets hasn’t been helping the banks trading and investment banking businesses. These have been common themes across global investment banks, but Deutsche Bank have been underling performing for a few years now.   

Capita Group had a dreadful run this week after issuing a profit warning, halting their dividend and declaring the need to raise £700 million through a rights issue. The company lost over half its value this week on the back of the announcement, and it is currently trading at 161P, up 0.8%. Morgan Stanley boosted its outlook rating on the company to equal-weight from underweight, and their price target is now 180p, down from 460p.

BT Group revealed their figures for the latest quarter and revenue slipped by 3% while earnings declined by 2%. Higher costs in relation to pensions and business rates were blamed for the weaker quarter, but on a positive note the outlook for the company remained unchanged. This morning the stock fell to its lowest level in five years, and if the bearish trend continues it could fall to 212p.

US

The Dow Jones, S&P 500 and NASDAQ 100 are all in the red today as the robust non-farm payrolls report from the US triggered fears about higher inflation and interest rates.

In January the US added 200,000 jobs and that was ahead of the 180,000 that economists were expecting. The December figure was revised higher to 160,000 from 148,000. The unemployment rate held steady at 4.1% - meeting expectations. The highlight of the report was that average earnings jumped by 2.9%, and the previous reading was revised higher to 2.7%, up from 2.5%.

The impressive average earning figures has gotten the ball rolling in relation to higher inflation fears, and in turn bond yields are edging up. The more attractive yield on US governments bonds is prompting traders to cash in their equity positions and hold bonds.

Exxon Mobile shares are in the red after the company revealed quarterly figures that missed expectations. Earnings per share (EPS) were 88 cents – a four year high, but traders were expecting $1.04. Revenue for the period was $66.52, while traders the consensus was for $74.31 billion. The oil titan did incur a one-off charge of $2.1 in relation the US tax reforms. Exxon are clearly optimistic about the future as they are planning on spending $50 billion over the next five years to boost production. The stock gapped lower today and if the near-term negative moves continues it could target 81.94 – the 200-day moving average.

FX

EUR/USD has been hit on the back of the strong US jobs report. The US dollar has had a terrible 2018 and earlier this week it was showing signs of bottoming out, and the impressive earnings from the US jolted the US dollar higher. The single currency has enjoyed a positive run against the greenback since November, and today’s US jobs report prompted profit taking.  

GBP/USD also took a hit on account of the surge in the US dollar. Sterling has been in a strong upward trend versus the US dollar since March and today’s disappointing UK construction update and the robust US non-farm payrolls report saw traders quickly unwind their long positions on the pound.

Commodities

Gold has fallen to a level not seen since the middle of last month as the healthy US earnings figures has prompted fears about rising inflations, which have gotten traders worried about an interest hike from the Federal Reserve next month. The Fed’s update on Wednesday highlighted there were some signs of creeping inflation, and now investors feel it will pick in light of the wages numbers.

Brent Crude oil and WTI have endured severe sell-offs in wake of the jump in the US dollar on account of the jump in the greenback. The energy market was drifting lower recently after registering a three year high last month, and now the decline has accelerated as the US dollar has become relatively more expensive.

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