Equity markets in Europe hit a six month high, but the FTSE 100 underperformed. 

Europe

Stronger-than-expected services PMI reports from China and the eurozone, along with optimism surrounding US-Chain trade talks boosted sentiment. The services industry reports from the euro-area helped shake-off the negative image of the currency bloc.    

Stagecoach was given a lift by the UK rail operation, which performed better-than-expected. The company owns a 49% stake in Virgin Rail – which posted a 6.7% rise in revenue in the 44 weeks until early March, while the other rail operation is tipped to register a 1.4% increase in revenue once the adjustment for the Virgin East Coast Franchise has been taken into account. The London bus and regional bus divisions registered increases of 1.3% and 3.4% respectively. The firm’s North American operation continues to hold the group back and it is in the process of being sold-off. 

Superdry shares have slumped after there was a mass resignation of the company’s board of directors in protest of the readmittance of Julian Dunkerton – the group’s founder, back onto the board. Mr Dunkerton left the company last year, and he has been keen to exert his influence given the poor stock performance in recent months – the share price fell to a six year low in December. The departure of the CEO and chairman, and four directors intend to step down in July has rocked investor confidence, and until there is some stability in terms of management, the stock is likely to remain under pressure.

AA registered a 62% fall in full-year pre-tax profit, while revenue edged up nearly 2%. The company beefed up its spending on the roadside assistance unit, and that was cited as a reason for the decline in earnings. The firm wants to be become more tech-focused, and improve efficiency. Last year, the average callout time was trimmed to 43 minutes, from 50 minutes, so it is clear their service is improving. 

US

Stocks are trading higher on the back of the reports that progress is being made in the trade talks with China. Larry Kudlow, economic advisor to the US government, said no deal has been reached yet, but he hopes to get closer to reaching a deal this week. China acknowledged, cyber hacking and Intellectual property theft, and that is seen as a step forward as it has previously been in denial.  

GameStop shares have sold-off sharply after the company reported disappointing figures. Fourth-quarter sales dropped by 7.6% to $3.11 billion, while equity analysts were expecting $3.3 billion. To make matters worse, the firm now expects next year’s full-year revenue to be between $7.47 billion and $7.89 billion, while the market consensus was $7.88 billion. The stock fell to its lowest level since 2005, and if it breaks below the $9.00 mark, it could pave the way for the $7.70 region to be tested

Caterpillar shares are in the red after Deutsche Bank trimmed its 12-month price target from $152 to $128. The bank lowered its outlook on the stock from buy to hold too. Essentially, the finance house believes the US construction sector is cooling, and China’s mega growth days are over, and that is why is it is less bullish on the stock.

The economic updates were underwhelming today. The ISM non-manufacturing slipped from 59.7 to 56.1, and it undershot the 58 forecast. The ADP employment showed that 129,000 jobs were added in March, and that was well below the 170,000. The ADP report could be construed as a sign the US labour market is tightening, and employers are finding it harder to fill the vacancies.

FX

EUR/USD is higher today after the euro area posted solid services PMI reports. Italy, France and Germany all posted service PMI figures that topped their respective flash estimates. The announcement encouraged euro buying, in light of the poor performance lately.

GBP/USD is a touch higher as dealers are hoping the UK is heading towards a soft Brexit. Prime Minister Theresa May is to hold talks with the leader of the opposition, Jeremey Corbyn, in a bid to break the Brexit deadlock, and dealers are a little on the optimistic side.

Commodities

Goldis in the red as traders are in risk-on mode. The move to the upside in global stocks has encouraged traders to dump assets that are perceived to be lower risk, and take on more risk in the form of stocks. 

Oil saw a surge in volatility on the back of the Energy Information Administration report which showed that oil stockpiles jumped by 7.23 million barrels, while the consensus estimate was for a 425,000 drop. Gasoline inventories fell by 1.78 million barrels, which was a slightly larger drop than expected.

 

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