Stocks in Europe saw a lot of volatility today. 

Europe

The European Central Bank maintained their monetary policy, meeting expectations. Mario Draghi, the head of the ECB issued a statement that was on the dovish side. The central banker cautioned about risks to the downside, and said that stimulus is needed to sustain inflation. Wilbur Ross, US secretary of commerce issued a mixed statement in relation to Chinese trade. Mr Ross claimed the two sides were ‘miles and miles’ away from ending the trade dispute, but he also said there is a fair chance that China will get a trade deal. The major European indices are mixed as a result.

Restaurant Group shares are lower today after the company registered a 1% rise in total sales, but like-for-like (LFL) sales for the 52 week period dropped by 2%. The group confirmed that full-year adjusted profit will be in line with current expectations. Last year, the group took over Wagamama for £559 million. At the start of the year, Wagamama confirmed that second-quarter revenue and earnings grew by 15.4%, and 18.7% respectively – so it seems the acquisition was sensible. The industry as a whole is finding it tough as higher business rates, wages and food inflation are all eating into profit margins. The stock has been pushing lower since September, and if the bearish move continues it might retest the 128p region.    

Vodafoneshares sold-off after Vodacom – the group’s South African division, registered a 0.9% fall in domestic revenue.  

St James’s Place revealed net inflows of £2.6 billion and £3.95 billion of gross inflows in the final quarter, while the market was expecting £2.55 billion and £4.05 billion respectively. The sharp decline in global equity markets in the last few months of 2018 hurt the sector as a whole, but on an annual basis, net inflows grew by 8%. 

US

The Dow Jones and the S&P 500 haven’t moved much today as the remarks from Wilbur Ross left traders wondering which way to look. Dealers are still in the dark over when the US and China will sort out their trade dispute, and it seems like the lack of detail is acting as a ceiling to US markets. 

Apple shares will be in focus today after the company announced plans to cut 200 jobs at its autonomous vehicle group – Project Titan. Investors are wondering what the company’s next move will be, will the tech giant switch lanes into the auto sector, or will it create software for the sector. A few months ago, there was chatter that Apple might look to acquire Tesla, and those whispers might resurface.

Southwest Airline registered record fourth-quarter earnings, and EPS came in at $1.17, while analysts were expecting $1.06. The airline expects revenue per available seat mile to be up ‘four to five percent’ on the year, and keep in mind the group posted 1.8% growth in the last quarter.  The government shutdown has dented the January revenue by in excess of $10 million. 

FX

The US dollar index is slightly higher today, largely because of the dip in the euro. The dovish update from Mario Draghi, put pressure on the euro and in the US dollar has rallied.

EUR/USD is in the red thanks to the update from Mr Draghi. The central banker said that ‘risks to outlook have moved to the downside’, and he also said that ‘significant stimulus is needed to sustain inflation’. A certain amount of this was already priced in, but now the market knows what the ECB are thinking. Earlier in the session, French services flash PMI dropped to its lowest level in nearly five years, and the German manufacturing flash PMI report fell to its lowest reading in 2013, so the euro area clearly has problems.

GBP/USD was also hit by the rally in the US dollar. Traders used the excuse of the firmer greenback to lock in some of the profit from yesterday’s rally. A group of MPs at Westminster admitted they don’t have enough support for a second referendum, and that has hurt the pound too.

Commodities

Gold is a little lower today as the increase in the US dollar has dented the metal. In recent months, there has been a strong inverse relationship between gold and the greenback, and that is playing out today.

Oil had a choppy session today as higher US inventories balanced out the fears surrounding US imposed sanctions on Venezuela. Yesterday, the American Petroleum Institute announced that stockpiles jumped by 6.6 million barrels. The Trump administration are reported to be considering their options in relation to Venezuela, and oil sanctions are a possibility. The Energy Information Administration showed that inventories grew by 7.97 million barrels. 

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.’