market relief

European stocks are set to finish higher today as the swing in US markets influences the rally. 

Europe

US stocks have been leading the way recently, and that remains the case. At the moment the uncertainly surrounding a possible trade war is falling, and that is helping to trigger the positive move in stocks. 

Cineworld shares are in demand after the company announced solid results. Annual revenue rose by 11.6%, but it is worth nothing that three box-office hits were a major driver of the increase in revenue. Cineworld is over-dependent on film studios producing smash hits for their success.

Cineworld bought out the American business Regal Entertainment, which makes it the second-largest cinema group in the world. The share price of the stock has been in decline since the takeover was announced in December, so investors are clearly unhappy with the move. The industry is feeling the pinch from streaming services, and traders would like to see the Cineworld experienced enhanced in order for it to stay ahead of rivals.   

Hammerson are under pressure today after Credit Suisse downgraded the stock to neutral from outperform, and lowered its price target to 460p from 650p. The Swiss bank cited a ‘cyclical change’ in British shopping patterns as reason for the downgrade. Traditional shopping centres are likely to see a decline in footfall as the popularity of online shopping increases. The stock has fallen to its lowest level since June 2012, and if the bearish move continues it could target 400p.

US

US markets have turned around and are now pushing higher. Investors are less fearful about the possibility of a trade war. President Trump is contemplating impose tariffs on $60 billion worth of Chinese imports, but seeing as no further progress has been made on that, investors are willing to buy back into the market. Boeing is the barometer of fear for a potential trade war with China, and the stock is reversing early losses.  

The US released some encouraging economic indicators today. The New York empire manufacturing report jumped to 22.5 from 13.1 in February, and the consensus was for 15. Import prices last month rose by 0.4%, which was ahead of the 0.2% that economists were expecting. The tick up in prices echoes the increase in PPI yesterday, and this adds to the hawkish sentiment. 

FX

EUR/USD has been dented by the firmer US dollar, and the underwhelming French inflation number didn’t help either. France’s CPI rate slipped from 1.5% to 1.3%, meeting forecasts. Yesterday, Mario Draghi, the European Central Bank (ECB) chief, stated that inflation in the bloc is subdued, and today’s report confirms that. Mr Draghi is less likely to alter ECB policy while the cost of living in the region is slipping.

GBP/USD has managed to nudge higher despite the firmer US dollar. Sterling has been gaining ground against the greenback over the past two weeks. In a quiet week for UK economic announcements, the pound is eyeing up the 1.4000 level, and if the bullish moves continues it could target 1.4150.

Commodities

Gold has been hit by the firmer US dollar, with the robust economic data from the US the driver behind the move. There are growing signs that costs in the US are rising, and this could add weight to the agreement that the Federal Reserve will continue tightening its monetary policy. The markets are pricing in a high probability of an interest-rate hike next week, and this is likely to keep pressure on gold.

WTI and Brent Crude have ticked higher today, but volatility is low. Oil traders are also keeping an eye on the political situation in the US after the International Energy Agency stated that a trade war could spark ‘strong consequences’ for oil demand. The energy market has been under pressure lately as traders are concerned about the high level of production in the US, and should demand be hit because of a possible trade war, it would make matters worse.   

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