News

Europe muddles along, US shrugs off impeachment news

Stock markets are a mixed bag heading into the close as the lacklustre mood has left indices directionless.

Europe

Now that the dust has settled from the UK general election, and the US-China trade deal, dealers don’t know which way to look. Between now and Christmas there isn’t much on the horizon in terms of macroeconomic news, so it is possible that equity benchmarks will continue to trade sideways.     

NMC Health shares tumbled as traders continue to be cautious of the stock as earlier in the week a report circulated that there were concerns about the company’s accounting. The company have hit back at the report, and they described it as ‘baseless’. Traders have been caught out by accounting scandals too many times before, so whenever a firm’s financial statements are being called into question, there is usually a rush for the exit. While the fear factor circulates, the share price is likely to remain under pressure.   

Capita Group were hit by a downgrade. Deutsche Bank lowered their rating on the company to sell from hold, but at the same time, the price target was upped to 155p from 140. The German finance house feel the lift the share price has received from the general election has been overdone. The announcement from Deutsche Bank encouraged some profit taking as the stock is up over 40% year-to-date. Jonathan Lewis has been at the helm for two years, and given the dramatic rebound its market value, his restructuring plans are clearly paying off.

US

Wall Street has shrugged off the impeachment news as the odds of the Senate voting by a two thirds majority to impeach President Trump are essentially zero. It is making big political news, but it isn’t cutting any mustard with traders. The Dow Jones and S&P 500 are showing decent gains as the bullish mood from the trade deal with China is still circulating. 

Darden Restaurant’s shares are lower despite the company posting a respectable set of quarterly numbers. Revenue came in at $2.06 billion, meeting forecasts. EPS was $1.12, which topped forecasts’ by 5 cents. Same-store-sales is a closely watched metric, and growth was 2% - in line with the consensus estimate. The group reaffirmed its full-year outlook.

Nike are in focus today as the company will reveal their second-quarter numbers after the market is closed tonight. Despite the intense trade spat between the US and China, the group managed to have a solid first-quarter as revenue and profit jumped by 7% and 25% respectively. The greater China area was the standout performer as sales increased by 27% in the first three months. In light of the cooling of the Chinese economy, traders will be keen to see how the division is holding up.       

FX

GBP/USD continues to suffer as trader’s book their profits from the impressive run the pound had between early September the general election result. There is a possibility the UK might wind up in a no-deal scenario after the transition period, so some dealers are using that as an excuse to trim to exposure to the pound. The Bank of England update was dull. As expected, rates were kept on hold at 0.75% and two voted to cut rates.    

EUR/USD hasn’t moved much today as there has been an absence of major economic indicators from the eurozone. The single currency has been broadly moving higher against the US dollar this month, but that has been more down to weakness in the greenback than euro strength.   

Commodities

Gold continues to be uneventful as the trading range has been low this week, and there has no clear direction. The lack of volatility in the US dollar as well as global stocks has spilled over to the gold market. Since mid-November, the metal has produced a series of higher lows, but it can’t seem to break above the 50-day moving average at $1,477.    

Oil has edged higher on the optimistic sentiment surrounding the US-China trade situation. The relationship between the Washington DC and Beijing is starting to show small signs of improvement as the Chinese ministry of finance has outlined six US products that will be exempt from tariffs from 26 December. The relationship is on the mend, which bodes wells for oil.

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.