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Markets muted amid Fed rate cut hopes

Markets muted amid Fed rate cut hopes

Stocks were higher this afternoon, but some of the positive momentum has cooled. 


Traders have high hopes of a dovish update from the European Central Bank (ECB) this week, and a rate cut from the Fed next week, and that has lifted sentiment. There is speculation the ECB will either cut interest rates on Thursday, or they will drop hints about looser monetary policy to be delivered in the next few months. Seeing as the Fed are widely expected to reveal some sort of interest cut later this month, the ECB might get out in front of them and move first, in a bid to soften the euro in advance of any potential Fed easing. 

Ted Baker shares are in fashion after Ray Kelvin, the founder, said he would consider an offer from a private equity group. Mr Kelvin stepped down as CEO earlier this year, but still owns nearly 35% of the group. The stock price has driving lower for over one year, and the remarks from Mr Kelvin suggest the bearish move might not be over. A combination of fragile consumer climate conditions, aggressive promotions, and questions over Mr Kelvin’s behaviour in the office, all contributed to the poor share price performance.

Metro Bank said it will sell £500 million worth of mortgages to Cerberus Capital. Earlier this year group had to raise £375 million in order to beef up its balance sheet after an accounting error underestimated its loan book exposure. In May, the bank confirmed that first-quarter earnings halved, and the net interest margin rate ticked lower. Today’s announcements paints a picture of continued weakness, and given the share price hit a record low last week, it underlines how bearish traders are on the stock.   

Whitbread shares have pulled back after the company confirmed the completion of the £2.5 billion return to shareholders. The company also stated it doesn’t have any other plans for capital returns. Given the stock is still up over 12% from when the enormous capital return was announced, today’s move seems like profit taking.           


The S&P 500 and NASDAQ 100 are higher this afternoon as a combination of Fed rate cut expectations, debt ceiling hopes, and improved US-China relations have all helped drive stocks higher. It was reported in China that Steven Mnuchin and Robert Lighthizer are likely to visit China next week. Lawmakers in the US are near a deal that would raise the debt ceiling for two years, and that is a factor in the bullish move in the US.           

Halliburton shares are higher today after the company posted well received second-quarter figures. EPS slumped from 58 cents one year ago to 35 cents, but it topped the 30 cents forecasts. Revenue cooled by 3.5% to $5.93 billion, which was slightly below forecasts. Revenue in North America increased by 2%, while International revenue jumped by 6%, and the group expects high international revenue in 2020. Last month, the stock fell to a level last seen in August 2009, so expectations we going into the report, and a break above the $24.00 mark, might bring $26.00 into play.

Micron Technology shares are in demand after Goldman Sachs upgraded the stock to a ‘buy’ rating from a ‘neutral’ rating. The Wall Street titan predicts that memory chip prices will pick up in the third-quarter, as excess inventory will reduced sooner than previously predicted. The restrictions being loosened in relation to Huawei should help the chipmaker too.        


GBP/USD saw some volatility as a number of Cabinet members resigned their posts, most notably, the Chancellor, Philip Hammond. The news caught political headlines, but the reaction from the markets was muted. These politicians are quitting before they sacked, as Boris Johnson is likely to be announced as Prime Minister tomorrow. 

USD/CAD has gained ground on the back of the retreat in the oil market, and poor Canadian wholesale figures added to the move also. The report from Canada, wholesale trade figures showed a decline of 1.8% in May, while economists were expecting an increase of 0.5%.


Oil is higher on the session thanks to heightened tensions in the Middle East. The Iranian regime seized a British tanker and that drove the oil market higher, but the bulk of the gains have been handed back. The tense situation in the region is likely to keep the energy market elevated.

Gold has barely moved today, and keep in mind it posted a fresh six year on Friday. The chatter of lower rates from the Fed is propping up the metal. Gold has enjoyed a bullish run in recent months, and while it holds above the $1,400 mark, the positive move if likely to continue.          

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