market relief

The bounce this morning was short-lived as the bulls ran out of steam. 

Europe

The decision by the US to investigate imported car parts has thrown a spanner in the works of the trade talks between Washington DC and Beijing. It might be a ploy by President Trump to leverage his position in trade negotiations. The move has shaken investor confidence, and it is a sign that these talks could be protracted.

TalkTalk had a strong start to the year as the company added 109,000 new clients – a record quarter. The firm is going through a period of restructuring, which has caused profit to fall by 35% to £233 million – meeting expectations. TalkTalk has agreed to sell its business-to-business division to Daisy Group for £175 million. The company confirmed it is on track to achieve earnings growth of 15% this year. After three years of declines the share price has been pushing higher since February, and if the upward move continues it could target 140p.

Kingfisher shares have had a volatile session after the price bounced back from the initial sell-off. The company revealed a 4% drop in like-for-like first-quarter sales due to the ‘unusually adverse’ weather in February and March. B&Q were already going through a soft patch before the ‘beast from the east’ struck. Two months ago, the company confirmed the outlook was ‘uncertain’, and the snow compounded problems. There was some positive news in the update too: Screwfix the wholesale division, saw higher comparable sales of 3.6%, and has plans to open 10 new stores. The stock has been in a downtrend since the end of 2016, and if the bearish move continues it could target 260p.

Paddy Power Betfair have agreed to acquire Fan Duel in the US. The London-listed company moved quickly to line up the deal after gaming laws changed in the US – which has opened up sports betting across the country. This will give Paddy Power Betfair exposure to the US market, which should cushion the blow to the tighter fixed-odds betting rules in the UK. 

US

Stock markets are lower today as geopolitics takes centre stage. US markets initially came under pressure as dealers were concerned the trade talks in China had hit a bump in the road, and now the decision by President Trump not to meet, Kim Jong Un, the North Korean leader, has soured sentiment even more. When the leaders of the two Korean states met last month, there was a sense of optimism, but that has now disappeared. The poorer political backdrop is weighing on investor confidence.

US jobless claims ticked up 9,000 to 234,000 – while economists expected 222,000. The latest home sales figures dropped by 2.5%, which was far greater than the 0.2% decline that economists had predicted. The underwhelming economic announcements confirmed the Federal Reserve’s less than hawkish update last night. 

FX

The US dollar index is softer today after the Fed minutes last night weren’t as bullish as anticipated. Dealers are expecting a rate-hike next month, but the prospect of two more rate hikes at the back end of the year has diminished.

GBP/USD was lifted by the dip in the US dollar and the firm UK retail sales. Last month, British retail sales jumped by 1.6% on a monthly basis, which comfortably topped the 0.7% increase that economists were expecting. Sterling has been under major pressure recently, but today’s report suggests the British economy could be in for a positive start to the second quarter.

EUR/USD also benefited from the slide in the greenback. In the first-quarter, the German economy grew by 0.3%, meeting expectations. It is worth noting that the previous reading was 0.6%, so the economy is clearly cooling. The upward move in the euro today is largely US dollar driven, so it may not last too long.

Commodities

Gold is higher today on the back of the soft US dollar. The metal hit its highest level in over a week, as traders are less fearful the Fed will quicken the pace of their monetary tightening policy. The uncertainty in global equities on account of geopolitical issues could also be helping the metal. Gold is above $1,300, but it would need to clear $1,326 in order to negate the recent negative move.

WTI and Brent Crude oil are in the red again as there is speculation that OPEC will boost output due to supply concerns from Iran and Venezuela. Yesterday’s energy information administration report showed a surprise surge in US oil and gasoline stockpiles, and that set the ball rolling for this downward move.

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.