market relief

Stock markets had a volatile day as respectable gains were racked up in the morning, and then we saw sharp decline, and subsequent bounce back after lunchtime. 

Europe

The positive momentum in London has sent the FTSE 100 to a level not seen for five trading session- which bodes well for the recovery.   

The collapse of Carillion has left its joint venture partner Galliford Try in need of cash in order to beef up its balance sheet. Galliford Try declared they intend to raise £150 million from shareholders, and this has spooked investor sentiment. The company has performing well other than the issues in relation to the Carillion joint venture, but the share price has dropped by XX%.

GKN have pledged to return £2.5 billion to shareholders over the next three years after it has completed a review of its operation. The company rebuffed a takeover approach from Melrose worth £7.4 billion. GKN stated the offer did not reflect the value of the company and now they are trying to keep shareholders on side by promising a capital return to investors. The takeover approach from Melrose could prompt the management at GKN to become more efficient. 

Sky and BT are higher today after both firm were granted the right to show English Premier League games for a lower cost than expected. Sky managed to obtain the rights to more games than last year, and at a lower cost per game than too. Shares in Sky hit a two-year high and if the positive run continues it could test 1130p.

US

The Dow Jones and the S&P 500 are in positive territory. The index futures endured a severe decline in pre-market trading on the back of the latest US CPI and retail sales numbers. The Dow Jones had a triple digit decline at the start of US trading, but has since swung around – which is common today.

Markets were very volatile on the back of the US inflation and retail sales figures. In January the inflation rate held steady at 2.1%, which caught traders off guard as the consensus was for a decline to 1.9%. Retail sale actually declined by 0.3%, which was a big a miss as economists were forecasting an increase of 0.2%. The initial reaction was a hawkish one, as traders viewed the headline CPI number as more evident the Federal Reserve could hike interest rates four times this year. As trader digested the data, it sunk in that CPI just held steady and there was a sizeable decline in retail sales, so the numbers weren’t as good an initially thought.

FX

EUR/USD experienced a very volatile session as the euro sold off wake of the US data, but then did a U-turn afterwards and is now higher on the day. Germany revealed respectable growth and inflation figures today, but the move in the foreign exchange market has been US dollar dominated. The euro has been on the rise against the US dollar since November, and the pullback in the greenback is adding to the move.   

GBP/USD is higher today on account of the dice in the US dollar.Sterling sold off against the US dollar on the back the CPI and retail sales data from the US, but since turned around. There were no economic indicators announced from the UK today, so the pound was nudged higher by the US dollar. British Foreign Secretary Boris Johnson called for the public to get behind Brexit, and said it should cause ‘hope not fear’, but the pound failed to rally on the back of the comments.

Commodities

Gold made remarkable recovery in the wake of the US economic announcements. The metal plunged through 1320, and then rebounded and has now comfortably cleared 1345 – a level not seen since the start of the month. Gold has been one of the most volatile markets of the day. The metal is firmly in the uptrend that begun in early December.  

WTI and Brent Crude oil jolted higher on the back of the announcement that US oil inventories increased, but the build in stockpiles wasn’t as high as initially expected, it increased by 1.84 million barrels but traders were expecting an increase of 3 million barrels. The oil market has been in decline recently, the data triggered short covering and bargain hunting.  

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