European equity markets have rallied today on the back of Mario Draghi’s dovish comments from earlier this morning. 

Europe

Mr Draghi, the head of the European Central Bank (ECB), talked about the prospect of using ‘additional stimulus’ and that has boosted equities. The possibility of lower interest rates, and or, a return to the bond buying scheme has acted as a green light to the bulls. 

Ashtead continue to perform well as annual profit jumped by 17%. The US is the firm’s largest division in terms of revenues, and the region registered a 19% rise in revenue, and that helped group revenue increase by 20%. The softness in sterling has been beneficial to the group as the majority of its revenue is quoted in US dollars. The share price performance has been hurt recently by the trade standoff between the US and China. There are some fears the US housing market is coming off the boil, and that works against Ashtead too. It is worth remembering that the stock is up more than 60% from November 2016 – when pro-business Donald Trump won the US presidential election.

Telecom Plus posted strong full-year numbers. Profit before-tax edged up by 3.7% to £56.3 million, which was largely in line with their own guidance, Revenue crept higher by 1.5%. The client base and the number of services provided increased by 4% and 8.2% respectively. The group’s outlook is bullish too as it predicts client growth of 5% and, services growth of 10%. Telecom Plus is good at taking care of clients as their churn rate is low when compared with the rest of the sector.

AstraZeneca’s ovarian cancer drug, Lynparza, received approval as a first-line maintenance treatment from the European Commission, and the stock is slightly higher on the back of the announcement.

Safestore are ticking along nicely as first-half revenue jumped by 5.6%. Like-for-like revenue in the UK rose by 5.6%, while Paris posted a 6.3% jump. The group registered a 13.7% increase in net asset value. The company holds a bullish outlook too, as it plans to expand its British and Parisian businesses, and it is on track it achieve its full-year targets. It wasn’t all good news for the firm, as profit plunged by 53%, but that was partially because of a reduced gain on investment properties. The share price is a little lower today, but it did reach an all-time high yesterday, so a bit of a pullback isn’t a surprise.

US

Wall Street has been helped by the bullish move in Europe, and now the news that President Trump will hold an ‘extended’ meeting with China’s Xi Jinping at the G20 summit, has acted as another shot in the arm to equities. An extended meeting between the two leaders is seen as a positive as it appears they are keen to broker a deal, and it is nice change from the previously tough rhetoric.

Facebook has unveiled their own cryptocurrency, Libra, and the move is being viewed as an alternative to traditional banking. The Facebook backed digital currency has the potential to be a big revenue stream for the social media titan. Facebook has over 2.3 billion active user per month, and that would potentially be a huge market to tap into. Bitcoin and Ethereum are a little lower today, but both cryptocurrencies rallied yesterday.

Beyond Meat shares surged to a new all-time high as the company is set to launch a new plant based burger. The bullish run on this stock continues, as the hype surrounding the company remains high.

The US posted some respectable housing data, as housing starts in May were 1.269 million, which topped the 1.23 forecast, and the building permits report was 1.29 million, broadly in line with forecasts.

FX

EUR/USD is in the red after Mr Draghi left the door open to rate cuts, and possibly the return to quantitative easing too. Given that the Federal Reserve are due to make their interest rate decision and statement tomorrow, it is now clear that Mario Draghi wanted to get his voice heard in advance of the US central bank update.

GBP/USD is a little lower on account of the firmer US dollar, which in turn has been pushed up by the slide in the euro. This evening, there will be the a debate between the candidates who are running for the Conservative Party leadership, and that will be in focus as it might provide a clue as to who will take the top job. Pro-Brexit Boris Johnson is the booker maker’s favourite.  

Commodities

Gold is up on the session, but it has been losing ground since it was revealed that Mr Trump will meet Xi Jinping. The surge in stocks on the back of the US-China news has prompted traders to close out their long gold positions. The metal acted as a safe haven when trade tensions were high, and now we are seeing a little reversal.

WTI and Brent crude have moved higher this afternoon as the global feel good factor has lifted the energy market. Throughout 2019, there has been a largely positive correlation between oil and equities, and that is playing out today. The perception that US-China relations might improve is helping the oil market. 

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