market relief

Broadly speaking it has been a positive day in Europe, but the FTSE 100 has been held back by corporate updates from a couple of influential stocks. 

Europe

The London equity benchmark suffered by comparison, as results that didn’t measure up to analyst expectations weighed on the overall market. Eurozone stock pushed higher as optimism returned, and the softer euro helped fuel the upward move.   

HSBC revealed robust figures, but they weren’t good enough to tops analysts’ estimates. The bank saw revenues and profits rise as cost cutting and the ‘pivot to Asia’ tactics were implemented. HSBC kept their dividend unchanged, but couldn’t expand the share buyback programme due to listing rules. Earnings from fixed income currencies and commodities (FICC) fell by 24%, which is line with its competitors. It was a positive update but unfortunately it failed to match forecasts so the stock is down 3.8% today. Stuart Gulliver is stepping down as CEO, and even though he would have preferred a more bullish final set of numbers, it is fair to say his legacy will be looked upon favourably.

BHP Billiton had an impressive first half, in fact it was their strongest first-half since 2014, but since the profits failed to meet market expectations, the stock is lower on the day. Profits rose by 25% to $4.05 billion, and equity analysts were anticipating $4.3 billion. The dividend was bumped up by 38%, and the net debt was cut by 23% - which are both music to investors ears. The company has done a remarkable turnaround since the commodity route that bottomed out in early 2016. The share price is down 4.7% today, but has been in an upward trend for two years so we could see fresh buyers enter the fold.  

US

The Dow Jones and S&P 500 are in the red as traders get back to business after a long weekend. We are seeing investors lock in profits from last week’s positive run, and the stronger US dollar is playing its role too. The Federal Reserve minutes from last month’s meeting will be revealed tomorrow, and traders might be tetchy on the run up to it as it was the fear of a tighter monetary policy that triggered this sell-off.

Wal-Mart share are down 9.8% after the company earnings that missed analysts’ expectations. Adjusted earnings per share (EPS) came in at $1.33, while analyst were anticipating $1.37. The low-cost retailer introduced proportions to compete with Amazon, and that is why margin were down.  Whenever companies engage in a price war, it the customers who benefit and the shareholders who suffer.

FX

EUR/USD has been hit by the strong US dollar and the economic indicators from Germany were underwhelming. German PPI slipped back to 2.1% from 2.3% and the ZEW economic sentiment report fell to 17.8 from 20.4. The fall PPI could be a front runner for weak CPI in the coming months, and should that be the case it might put pressure on the euro. Eurozone consumer confidence fell to 0.1 from 1.4 in January, and this reflects negatively on the currency block.

GBP/USD is holding up well considering the UK CBI industrial order expectations were not too hot, and the US dollar index has it a one week high. The reading for the CBI industrial order expectations was 10, and that was in line with economists’ expectations, but a hefty decline from the January’s reading of 14. The pound has been in an upward trend versus the US dollar since March, and there are no signs of the positive move coming to an end.

Commodities

Gold has been hurt by the former US dollar again. The commodity has traditionally had an inverse relationship between with the greenback, and that relationship is strong at the moment. Even though US equity markets are in the red, gold has benefitted from the decline in stocks. Despite the negative move in gold, the market is still in the upward trend that it has been in since December.

Brent crude oil and WTI are in the red as the same old fears about over-supply are doing the rounds. The three-year high in the energy market that was reached in January has prompted the US to ramp up output to record levels.

It is not just the US who are taking advantage of the relatively strong energy market. Nigeria are producing on average 1.93 million barrels per day (bpd), which is comfortably above their pledge to keep output at 1.8 million bpd – to keep OPEC happy.     

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