The London market did a U-turn from yesterday which was held back by BHP Billiton and HSBC. Whereas today impressive results from a bank and miner drove the index higher.
Lloyds shares are higher on the day after the bank posted its highest profits since 2006. Pre-tax profits jumped by 24% to £5.3 billion, but the higher than expected provision for PPI, prevented the banks from reaching analysts’ forecasts of £5.7 billion. The company boosted its returns to shareholders by revealing a 20% jump in dividend and mapping out a £1 billion share buyback scheme. The bank has come on leaps and bounds since the dark days of the credit crisis, and the restructuring programme has worked. Further improvements to the business will be made, Lloyds plans to invest £3 billion over the next few years in technology and customer service. The stock is up 3.4% today and has been broadly been moving higher since July 2016, and if the positive moves continues it could target 73.5p.
Glencore pleased shareholders today by revealing a 44% increase in earnings. Net debt has fallen by 31% to $10.7 billion, and that is near the lower end of the forecasted range of between $10 billion - $16 billion. The fall in debt will give the company more breathing space as interest payments are compulsory. The firm will return $2.9 billion to shareholders in the form of dividends in 2018, and this caught the attention of the markets. The figures were the company’s ‘strongest on record’ and the sentiment is bullish. The share price is up 4.8% today, and been in an upward trend over two years, and if this positive run continues, it could target 416p.
The Dow Jones and S&P 500 are higher today after enduring losses yesterday. The bounce back today fits in with the wider positive move over the past 10 days. The optimism that was around last week seems to be flowing market into the markets today.
It is worth noting the sell-off in global equities was triggered by stronger than expected earnings figures from the US. Investors felt the solid earnings would prompt the Federal Reserve to hike interest rates four times this year. The minutes from the latest Fed meeting will be released at 7pm (UK time), and it should be the highlight of the session. Even if the minutes are a touch on the hawkish side, investors are less likely to be rattled as some of that language is already priced in.
GBP/USD fell to a one week low after the UK revealed a slight rise in unemployment, and the US dollar continues to rebound off its multi-year lows. The UK unemployment rate unexpectedly rose to 4.4%, up from 4.3%, and economists were expecting the rate to hold steady. The same announcement showed that average monthly earnings ticked up to 2.5% from 2.4% in November. The pound was losing ground to the US dollar before the announcement, and traders latched on to the worse than expected unemployment rate.
EUR/USD came under a bit of pressure after France and Germany revealed manufacturing and services figures that showed a slight cooling of the growth rate. German manufacturing PMI fell to 60.3, from 61.2 and French services PMI slipped to 57.9 from 59.3 in January. It is possible the relative strength of the euro recently has held back the growth rate of the sectors. While the euro holds above the 1.2200 mark it outlook is likely to remain bullish.
Gold has had a volatile day as the metal printed a one week low in the early hours of trading and has rebound from the mark. Traders will be keeping a close eye on the Fed minutes later on as it may provide a clue as to what might be the next move in relation to monetary policy. Lately the inverse relationship between gold and the US dollar has been strong so we could see some additional volatility in the metal this evening. Some traders are pencilling in four interest rate hikes this year, and the March meeting could be the first lift off of the year.
WTI and Brent Crude oil have been experiencing low volatility today. Traders are still concerned about the oversupply issue in the oil market, as US output has hit a record level. The American Petroleum Institute (API) will release the latest oil data at 9.30pm (UK time), and the consensus is for 1.5 million barrels, down from 3.9 million barrels last week.
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