European equity markets are lower this afternoon as no change to the macroeconomic climate encouraged traders to cash in their positions. 

Europe

The US-China trade spat, the Italian recession and the uncertainty hanging over Brexit are all bubbling away in the background. Volatility has been low as there has been little in the way of news to trigger excitement. 

Ryanair shares are lower after the company announced it suffered a net loss of €19.6 million in the third-quarter. The passenger numbers grew by 7.5% and revenue jumped by 9% in the period. The firm blamed higher oil prices and lower fares for the drop in profit. The sector has become more competitive recently, but Ryanair haven’t done themselves any favours with industrial disputes and the piot roster fiasco. The airline is often quick to cut fares to draw attention any from negative headlines, but that it’s eating into their bottom line. If they treated their staff and customer better they wouldn't have to resort to cutting prices.

Flybe shares have rallied today after it was reported that Andrew Tinkler, former Stobart CEO, expressed interest in the airline. Virgin Atlantic seemed like the only bidder, and now Mr Tinkler appears to be a contender. Until recently, Virgin were the only potential buyer, and there was a feeling the bid was particularly low, and now the talk of Mr Tinkler putting in a bid, has lifted the struggling stock this morning.

Ferrexpo cautioned that its full year results might not be published on time as the group is investigating payments to a charity. The firm’s auditors, Deloitte, described the proof of payments to the charity as ‘unexplained discrepancies’. The mining company warned that annual earnings would fall by roughly 10% as weaker sales and higher cost hit the firm.  

US

The major indices are mixed as some of the bullish sentiment has waned. US stocks have been broadly pushing higher since late December and today some traders have adopted a more relaxed outlook. According to FactSet, nearly half the companies in the S&P 500 have reported their latest quarterly figures, and 68.5% have topped forecasts. Gilead Science and Google’s parent, Alphabet, will report their figures tonight after the closing bell, and that is likely inject volatility into the futures market.

The factory orders report showed a decline of 0.6% in November, while economists were expecting a 0.2% increase, and keep in mind the October report showed a 2.1% fall. Some traders are still sceptical of last Friday’s jobs report, and the factory orders update adds weight to the argument the Federal Reserve should sit on the fence in the short-to-medium term.

FX

EUR/USD has been hit by the firmer US dollar. Eurozone PPI in December fell to 3% on annual basis, economists were anticipating a reading of 3.1%. The reading one year ago was 4%, and that large drop is likely to be because of the fall in oil. We saw a decline headline CPI last week, and that trend is likely to continue as softer producer prices are likely to feed into softer consumer prices in the medium-term. Italian CPI has cooled to 0.9% from 1.2%, and that is worrying as Italy is in recession as weak demand is likely to compound the problem. 

GBP/USD is broadly unchanged today. It has been a relatively quiet day in terms of political and economic news. The UK construction PMI report was released this morning and the January reading dropped to 50.6 – its lowest rate of expansion in ten months. The building trade is sensitive to Brexit and given the lack of clarity, it isn’t surprising there is a cooling of activity.  

Commodities

Gold is in the red today as the rally in the greenback has hurt the metal.  There continues to be a strong inverse relationship between the two markets. Despite the commodity’s pullback today, it remains in its wider upward trend, and if the bullish move continues it might target the $1,335 region.

Oil has turned lower due to profit taking. In early trading the energy market hit its highest level since late December. US sanctions against Venezuela and a decline in active rigs in the US helped drive the market to a multi-month high, but dealers decided to bank their profits. Oil has been driving higher since late December, and today’s dip might see fresh buyer enter the fold.

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