Stock markets in Europe haven’t moved much today as some investors are sitting on their hands in advance of the much awaited Federal Reserve meeting on Wednesday.

Europe

There has been a lot of chatter about the Fed cutting rates later this year, but some traders feel the markets are getting ahead of themselves.  

Babcock share are in demand this afternoon after the group said it received an ‘unsolicited and highly preliminary’ bid from Serco in late January. The proposal didn’t amount to anything, but seeing as Serco tried to merge with Babcock previously, some traders feel the story could resurface or other suitors might emerge as merger and acquisition chatter usually lingers in a sector.  

Kier Group shares slumped after the firm announced a restructuring plan that will entail 1,200 job cuts. The group intends to dispose of non-core assets and it halted the dividend in a bid to conserve cash. The group admitted that the debt level is too high and that the business hasn’t been focused enough on chasing cash generating projects. Kier hopes to make cost saving of £55 million from 2021. The profit warning from Friday is still fresh in traders’ minds, and even though today’s restructuring scheme is a clear sign the firm is taking action, it still hasn’t reassured investors. Kier can’t catch a break, and dealers are fearful it will suffer the same faith as Carillion, even though the company is salvageable.

Lufthansa warned that profit won’t be as high as previously predicted and the stock sold-off sharply on the back of the update. The airline now predicts earnings growth to be between 5.5% and 6.5%, while the previous guidance was for profit growth of between 6.5% and 8%. The firm still hopes to make a profit, so there are worse problems to have, but Lufthansa blamed though competition from low fare carriers for the lowering of guidance. Savvy customers are seeking out promotional offers that has hit the German group.

Deutsche Bank revealed its plans to set up a €50 million bad bank. The struggling finance house might look to reduce the number of non-core assets its holds, and further restructuring of the business is expected.  The bank has undergone a lot of restructuring, but it still has more to go, and today’s update is seen as an attempt to try and restore some confidence in the finance house. Earlier this month, the stock hit another all-time low and investor sentiment remains fragile.   

US

It was been a quiet day on Wall Street, but traders are mildly optimistic. The empire manufacturing report dropped to -8.6 in June, which undershot the 12.1 forecast, and it was a big drop from the 17.8 reading in May. Today’s update was the weakest reading in over three years, and it adds weight to the argument that the Federal Reserve should cut rates later this year.  

Array Bioharma shares surged after Pfizer made a $48 per share bid the stock. Pfizer are looking to diversify their portfolio of products are keen to acquire Array in order obtain its skin cancer drugs and other treatments. This is a common move in the pharma sector, whereby a major player such as Pfizer - that has made huge profits from successful drugs like Lyrica, is using cash to snap up other firms which have successful treatments, rather than invest heavily in research and development.     

Deere shares are higher today after R.W. Baird upped its rating on the stock to ‘outperform’ from ‘neutral’. The investment bank believes that the push higher in agriculture commodities on account of the harsh weather will bring about a jump in demand for farming equipment. 

FX

EUR/USD has been helped by the dip in the US dollar. The greenback lost ground in the afternoon, and it dropped to the session’s lows in the wake of the empire manufacturing report. At 6pm (UK time), Mario Draghi ,the European Central Bank chief will be speaking ,and dealers will be paying close attention to what he has to say in case he offers any clues about future policy.

GBP/USD hasn’t moved much today as the only economic announcement of any importance was the Rightmove house price index report, which showed prices grew by 0.3% on a monthly basis. Volatility in sterling is likely to remain low until the Conservative Party establishes a new leader.

Bitcoin has rallied today on the news that Facebook will launch its own cryptocurrency. The move by the social media giant adds credibility to the industry, and Bitcoin and Ethereum have rallied today.     

Commodities

Gold is a little in the red as traders lock in profits. The metal enjoyed a major rally since late May, and now some dealers are unwinding their positions ahead of Wednesday’s Fed meeting.

WTI and Brent crude are a little lower today as concerns linger about demand after last week’s International Energy Agency announcement. The body cut its demand forecast. Tensions in relation to US-China trade have hurt the Chinese economy, and that has played out in the disappointing industrial production numbers we saw last week.         

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