European stock markets are in the red heading into the close as under-whelming data from China overnight prompted selling. 

Europe

The official Chinese manufacturing PMI report, and the Caixin survey of Chinese manufacturing came in at 50.1 and 50.2 respectively, and both updates showed slower growth on the month, and the reports undershot forecasts. The announcements indicate that China’s economy might not be enjoying the bounce back that other reports have suggested. In London, the mining sector has been hit hard, as China is a major importer of minerals. Rio TintoBHP Billiton, and Glencore are all in the red this afternoon.  

Standard Chartered shares are in demand after the bank announced plans to launch a share buyback scheme of up to $1 billion, and that would the first of its kind in nearly 20 years. The bank posted a 10% jump in quarterly profit too. The rise in earnings and the plan to pay a generous share buyback scheme projects a positive image, and it is bring construed as a sign the restructuring programme that was launched in 2015 is working. The stock has been pushing higher since October, and if it holds above the 640p mark, it might look to retest the 785p region.

Whitbread’s full-year profit slumped by over 39%, but that was because the group disposed of its Costa Coffee unit. Underlying operating profit ticked up by 0.6% and revenue increased by 2.1%. The full-year dividend was upped by 1.5%. The company warned that ‘political and economic uncertainty’ in relation to Brexit will weigh on sentiment. That has been a common complaint by British businesses, but it could also be a way for expectations to be lowered.

BP confirmed that first-quarter earnings dipped to $2.4 billion, and the consensus estimate was $2.6 billion. The acquisition of BHP Billiton’s shales assets helped the group’s oil and gas production increase by 2%. Costs were lower, but so were oil prices. The group aims to sell off assets in order to pay off the takeover of the BHP unit, and the debt to equity ratio edged up to 30.4% from 30% in the same period one year ago. Investors usually forgive commodity firms for high debt levels when the underlying assets are strong, but a downturn in the energy market is likely to punish the firm extra hard.

US

The S&P 500 has pulled back from the record-high yesterday as mixed corporate results encouraged some profit taking. The NASDAQ 100 outperformed last week, but it has suffered today on account of Alphabet, Google’s parent company. 

Alphabet shares are in the red after the company posted its first-quarter figures last night, and traders are concerned about the slowdown in sales growth. Revenue for the three month period was $36.3 billion, which undershot the $37.33 forecast. Sales jumped by 17% in the period; it grew by 26% in the same period last year. Despite the sharp decline, the stock is still up 21.44% from the late December low.

GE’s shares rallied after the company announced solid quarterly results. EPS came in at 13 cents, topping the 9 cent forecast, and revenue was $27.3 billion – broadly in line with forecasts. The group has been undergoing a restructuring scheme for a number of years, and more is to come, but GE did reiterate its outlook for the year.

Apple will be in play as the company is due to reveal its second-quarter figures tonight after the closing bell. The company took the decision to stop reporting the exact unit sales of iPhones and iPads, and there is speculation that we have reached peak iPhone. Firms usually promote positive updates, and try and deflect negative news. Should we see a drop in the average selling price of iPhones, it might be a sign that cheaper models are more popular. Traders will be listening out for updates in relation to the streaming TV service, and in particular, how much money is being invested in the division. Apple aren’t short of cash, but Netflix have a massive head-start on them.      

According to the Case-Schiller report, US house prices grew by 3% on an annual basis in February, and that was the slowest growth rate in seven years. By-and-large, the news from the housing sector has been weak, but luckily, the Federal Reserve appears keen to keep interest rates on hold for the time being. 

FX

EUR/USD has been assisted by the respectable economic reports from the eurozone. The currency bloc grew by 0.4% in the first-quarter, on a quarter-on-quarter basis, and it topped the forecast of 0.3%. The jobless rate edged lower to 7.7% - its lowest level in over 10 years. Adding to that, the Italian economy grew by 0.2% in the first-quarter, and therefore it is out of recession.

GBP/USD has pushed higher as the broader dip in the US dollar is propping up the pound. A spokesman for Prime Minster May said that talks with the Labour Party have been constructive, and no end date for the talks were laid out.   

Commodities

Gold has only moved slightly higher today, even though the US dollar index has seen a sizeable drop. The gold market has been broadly pushing lower for over two months, and if it can’t muster a respectable rally when the greenback soft, it might struggle to snap out of its bearish trend.

Oil has rallied today as political turmoil in Venezuela has added to supply concerns. The country’s opposition leader has requested that the military support him, and halt Maduro’s rule. There are supply concerns from the Middle East too, as Saudi Arabia said that OPEC output cuts might extend beyond June, and run until the end of the year.   

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