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Sterling in focus as its D-Day for May

The FTSE 100 is in the red as we approach the close of business. 


A fall in energy and consumer stocks is hurting the British index. Politics will be in play again as Prime Minister May faces a no-confidence vote after last night’s humiliating defeat in parliament. Mrs May is likely to survive the vote, as the Conservatives and the DUP don’t want Labour to be given a chance to contest a general election. Eurozone equity markets are broadly higher as the mood is a little on the optimistic side, but the rebound since late December is starting to look a little jaded.    

Bovis Home announced that full-year profit will be slightly ahead of market consensus. The home builder saw completions tick up by 3%, and the average selling price was fractionally higher on the year. The firm said it was too early to comment on 2019 trading, but they seem to be cautiously optimistic. The cooling of the UK housing market, and political uncertainty has soured sentiment for the house building sector, so today’s upbeat update has been welcomed by investors. The stock has pushed higher since mid-December, and if the rebound continues, it might target the 1,000p area. Persimmon and Berkeley Group have been lifted too.

Pearson said it expects to post full-year adjusted operating profit of between £540 million and £545 million, and that compares with analysts’ forecasts of £536 million. Adding to that, the group predicts 2019’s adjusted operating profit will be between £590 million and £640 million, while the consensus estimate is £601 million. The group now expects annual cost savings to be higher than previously estimated. The firm’s turnaround programme is going well, and net debt is expected to halve. The stock gapped lower this morning, but seeing as it reached its highest level in over three years last week, a lot of good news was already factored in.

Tullow Oil expects production to be between 94,000 and 102,000 barrels of oil equivalent per day (boed), and last year output was 90,000 boed. The firm missed its cash flow and debt targets as a payment for Ugandan oilfield assets was delayed. The stock has been in decline since October, and if it remains below the 200-day moving average at 222p, its outlook should remain negative.


The Dow Jones and S&P 500 both reached fresh one-month highs as sentiment has been lifted by solid earnings. US indices have extend their gains from late December, and but traders are treading lightly as we have yet to hear further details about how the US-China trade talks ended last week.

Goldman Sachs posted largely positive fourth-quarter figures. Earnings per share (EPS) were $6.04, which comfortably topped the forecast of $4.45, Revenue for the period was $8.08 billion, which also topped the $7.55 billion forecast. Investment banking fees came in at $2.04 billion, while the forecast was $1.88 billion. Revenue from fixed income, currency and commodity trading was $822 million, while equity analysts were expecting $976.3 million. The shift more towards advisory work underlines the bank declining dependence on the financial markets for earnings.

Bank of America announced impressive fourth-quarter numbers. Quarterly earnings tripled to $7.3 billion, a record, and it topped forecasts too. Revenue was $22.7 billion, which was just ahead of expectations. The consumer banking division unit posted a 52% rise in earnings. Equity trading revenue grew by 11%, while fixed income trading revenue dropped by 15%. The stock has been bouncing back since late December, and if the bullish move continues it might target the $30.00 region.


EUR/USD is in the red due to the firmer US dollar. German CPI in December held steady at 1.7%, and it is encouraging to see that demand is unchanged. Italian industrial orders in November dropped by 2%, and that adds weight to the argument the county is going through an economic downturn. 

GBP/USD is higher on the run up to the no-confidence vote. The Prime Minister is likely to survive the vote so currency traders aren’t too worried. UK headline inflation cooled to 2.1% from 2.3% in December. Given the major slide in oil prices at the backend of last year, a fall in inflation was expected. The core CPI reading edged up to 1.9% from 1.8%, and that points to a genuine increase in demand. 


Gold is experiencing low volatility again. The metal may not have moved much, but it remains in the upward trend that began in November. The commodity seems to run out of steam when it approaches the $1,300 mark, and if that metric is taken out, it might pave the way for $1,326 to be tested.

Oil saw a jump in volatility on the back of the Energy Information Administration report, which showed that US oil stockpiles fell by 2.68 million barrels, and gasoline inventories jumped by 7.5 million barrels. The global story is a factor in the oil market too, and for now dealers are a little hopeful, but we still need to find out the final details of the US-China trade meeting. 



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