Stocks enjoyed a boost as the positive sentiment in the US rubbed off on Europe. 

Europe

Investors are still in an upbeat mood post the US-Mexico trade deal. The London market was shut yesterday on account of the bank holiday, but it made up for lost ground today, as dealers snapped up mining, banking and consumer stocks.

Bunzl had a solid start to the year, as first-half revenue and adjusted pre-tax profits jumped by 5% and 3.8% respectively. The company has been producing dividend growth for 25 years, and it has upped its interim dividend by 9%. Bunzl is optimistic in its outlook, but it is worried about trade tariffs in North America and the lack of clarity regarding Brexit. The stock has been pushing higher since March, and if the bullish move continues it could target the 2,500p region.

Lloyds confirmed that it completed the £1 billion share buy-back scheme that it announced in February. The bank has come on a long way from the credit crisis, and the fact that it is returning cash to shareholders underlines the strength of the balance sheet.  The stock has been in decline since January, and while it remains below the 64p mark, its outlook might remain negative.

Countrywide shares are in the red after shareholders approved £140 million worth of emergency funding. The estate agent is struggling and the funding is vital for the firm’s survival. 

CRH shares are in the red after JP Morgan cut its price target from €37 to €36. It is worth noting the construction materials giant posted a respectable set of first-half figures last week.

US

The trade deal between the US and Mexico is fuelling the stock market rally. Fresh record highs for the S&P 500 and NASDAQ 100, and the Dow Jones reached a level not seen since early February. US treasury secretary Steve Mnuchin said he is hopeful a trade deal can be reached with Canada soon. The breakthrough with Mexico has lifted investor sentiment, and there is a growing feeling of optimism.

Best Buy shares are in the red as the firm’s sales growth rate topped analysts’ expectations, but showed a slowdown on the quarter. Second-quarter revenue jumped by almost 5% to $9.38 billion, which exceed the $9.28 billion forecast. Traders focused on the fact that first-quarter revenue jumped by 7%. 

The Conference Board consumer sentiment report jumped to 133.4 in August – its highest reading since 2000. It is encouraging to see that consumer sentiment is strong, but it would be even more encouraging to see strong retail sales or robust quarterly updates from a wide range of retailers.

The Case Shiller house price index showed 6.3% growth in June on an annual basis, and economists were anticipating 6.5%.

FX

The US dollar index is lower again as traders are still mindful of the comments Jerome Powell made on Friday. The Federal Reserve chief didn’t seem worried that the economy or the inflation rate were going to surge, and this added to the selling pressure on the dollar.

EUR/USD has been lifted by the slide in the US dollar. It hasn’t been the most interesting day for news stories from the eurozone. French consumer confidence in August held steady at 97 – meeting economists’ forecasts. Italian consumer confidence slipped from 116.2 in July to 115.2 in August, while the forecast was 115.9.

GBP/USD has also been helped by the dip in the dollar. There is still uncertainty surrounding Brexit, and the more chatter of a ‘no-deal Brexit’, the more pressure we could see being applied to the pound.  

Commodities

Gold hit its highest level in over two weeks as the weakness in the US dollar is making the metal more attractive. The strong inverse relationship between the gold market and the US dollar continues, and if the positive move is extended it could target $1,226 – the 50-day moving average. The wider downward trend that began in April is still intact, and a break below $1,200 could bring $1,183 into play.

Oil is experiencing low volatility ahead of the American Petroleum Institute inventory data at 9.30pm (UK time). The sharp decline in US oil stockpiles last week helped oil hit multi week highs recently. Signs of falling output from Iran on account of the US sanctions are playing into the firmer price too. 

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