The momentum in the market recovery has run out of steam, and now traders are undecided whether the market will turnover on itself again, or if this is a breather before another leg higher. 

Europe

The economic outlook hasn’t changed, but with the Italian election over the weekend we could see traders adopt a risk-off strategy.   

WPP are still suffering at the hands of Google and Facebook as companies are shying away from traditional advertising and are using online targeting to reach their customers. Like-for-like billing declined by 5.4% and 2017 ‘wasn’t pretty’ according to the CEO Martin Sorrell. The company revealed disappointing figures in August and today’s announcement sent the stock to its lowest level since October 2014. Traders may remain sceptical about the company until it can challenge the tech titans for advertising space.

Carpetright shares are have been trounced again after the company issued its second profit-warning in two months. At the start of the year the firm said it expects to make a small profit, and now they have conceded they expect to swing to a loss. Trading conditions were described as ‘difficult’ and the company is meeting with lenders as  it hopes to ‘turnaround the businesses’. Sentiment surrounding the stock is weak, and until it offers a restructuring plan, investors are likely to give it a wide berth. 

US

US markets are a mixed bag, but weak volatility is the common theme. Traders are keeping an eye on the screen and an ear out for US Federal Reserve chief Jerome Powell’s speech. It is likely volumes and activity will pick up after Mr Powell’s update.

Mr Powell is speaking in Washington before the Senate Banking Committee. He has stated he was surprised that wages haven’t risen that much since the financial crisis, especially when you consider how much the unemployment rate has fallen. The central banker said that nothing suggests wage inflation is at an acceleration point.

US economic indicators were broadly positive today, which makes a nice change from some of the not-too-hot figures that we have seen recently. Jobless claims fell to 210,000 from 222,000. The core PCE rate held steady at 1.5%, meeting expectations. The core PCE figure is the Federal Reserve’s preferred measure of inflation, seeing as their target is 2%, and it clearly has some way to go. The ISM manufacturing report for February jumped to 60.8 from 59.1 in January. It was the joint highest reading since 2011. The price paid component of the report saw a major jump, which could be a front-runner for higher inflation down the line.

FX

The US dollar index hit its highest level in 10 weeks as traders mull over the possibility of four interest-rate hikes from the Fed this year. US jobless claims fell, while core PCE held steady, and this kept demand for the greenback up.

EUR/USD was hit bit by the upward move in the US dollar and the cooling of eurozone manufacturing also weighed on the currency pair. Italian, French and German manufacturing all grew at a slower pace in February, and all the reports missed economists’ expectations. There has been a slight cooling in economic indicators from the eurozone recently, and this is playing on traders’ minds.

GBP/USD is marginally lower as concerns about Brexit talks continues to weigh on the pound. For the time being there doesn’t appear to be a solution to the Irish border issue. Sterling has lost ground over the past couple of weeks, but the wider upward trend from March last year is still intact.

Commodities

Gold has dropped to a fresh three-month low as the push higher in the US dollar continues to weigh on the metal. The talk of four rate-hikes from the US central bank this year is the main driver behind the negative move in gold. Seeing as the core PCE remained unchanged there hasn’t been any additional anxiety about tighter monetary policy from the Fed.

WTI and Brent Crude oil remains in its recent downward trend as dealers are still concerned about over-supply. The energy information administration (EIA) report yesterday still resonates with traders, as it showed a jump in stockpiles in oil and gasoline, and US oil production reached a new record.

OPEC are keen to curb production and output fell by 70,000 barrels per day – its lowest level since April 2017, but it still couldn’t stop the selling pressure.

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