Stock markets are stronger today as Washington DC will be taking a softer stance on international investment. 

Europe

The move from the Trump administration gave investors some hope that a full-on trade war will be avoided, and this prompted a wave of buying.

Whitbread shares are in demand after the firm released a passable first-quarter update. Total sales for the first three months jumped by 3.2%. The Premier Inn division saw like-for-like (LFL) sales fall by 0.9%, and the Costa Coffee department saw sales slip by 2%. The rise in the Costa Coffee express machines has dented the store sales. It is never a good sign when a company is dependent on expansion for a rise in revenue. The firm is in the process of demerging Costa Coffee, and today it confirmed the process is going well but that it might take up to two years. Elliott Advisors, a shareholder in the company who have been pushing for the demerger for some time, believes the spin-off should take six months.

We heard further proof that high street retailers are struggling today, as John Lewis confirmed that profit would be close to zero in the first-half of this year. The group announced that the John Lewis department store is likely to see earnings fall, while the Waitrose division is tipped to see a rise in profit. The firm announced plans to close five Waitrose stores to combat the subdued retail environment.   

IWG shares are in the red after the firm issued a profit warning. The office space company confirmed that profit will fall by between £15 million and £20 million shy of previous forecasts. IWG recently spent £230 million on additional floor space while their original intention was to spend £200 million, and that is what brought about the profit warning.

US

Equity markets are higher now that it seems the US is taking a more relaxed position regarding investment from China. The Committee on Foreign Investment in the United States (CFIUS) will access international investment in the US. Traders are viewing this less aggressive way to monitor overseas investment in the US as a boost for international relations.

Traders welcomed the initiative as the government now appears to have a body that will deal with the issue, and it should lead to less confusion about which investment is allowed and which isn’t. Recently, different members of the Trump administration seemed to be on different wavelengths from one another, and that added to the uncertain economic environment.

Dealers are now happy to enter the market and pick up relatively cheap equities. The trade dispute is still ongoing, so investors’ optimistic mood may not last too long.

FX

GBP/USD is in the red as the US dollar pushes higher. The greenback hit an 11-month high recently, and it appears it is resuming its bullish move. Mark Carney, the chief of the Bank of England, delivered the financial stability report today. Mr Carney accused the EU of dragging its heels in relation to recognising financial derivative and insurance contracts. The BoE chief warned there would be turmoil if an agreement is not reached before the UK leaves the EU. This announcement put some pressure on sterling too.

EUR/USD is also feeling the pain on account of the firmer greenback. French consumer confidence slipped to 97 in June, down from 99. It’s not a major drop in confidence, but it underlines the economic soft patch the region is going through.

Commodities

Gold has been hit by the strong US dollar again. The metal fell to a fresh six-month low as the firmer greenback dented the commodity. Gold has been in decline since April, and if the negative move continues it could target $1,250.

WTI and Brent Crude oil have reached multi-week highs on the back of the latest energy information administration inventory report. The announcement showed that US oil stockpiles dropped by 9.89 million barrels, while the consensus estimate was for a decline of 2.45 million barrels. The decline in gasoline stockpiles was broadly in line with estimates. The oil market has been in an uptrend for the past year and, in light of today’s move, it appears the bullish trend will continue.

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