The FTSE 100 is set to finish deep in the red as a mixture of a firmer pound and a poor performance from banking and energy stocks has hurt the index. 

Europe

Diageo, GlaxoSmithKline, AstraZeneca, Ashtead and Unilever all derive a large portion of their revenue from overseas, so the push higher in the pound usually hits the stocks. The declines in Royal Dutch Shell, BP, HSBC and Lloyds are weighing on the British benchmark too. Mining stocks such as Fresnillo, Glencore, Anglo American and BHP Group are some of the best performers on the FTSE 100. The well-received manufacturing data from China overnight has lifted metal prices and in turn the mining companies.

Continental European equity markets are mostly in the red too, but the DAX 30 is showing a small gain as the German government now predicts the economy will shrink by 5.8% in 2020, which was an improvement on their previous prediction of a 6.3% fall in output.            

Dunelm shares hit a fresh record high today on the back of a short and sweet trading update. The specialist in homeware confirmed that revenue in July and August jumped by 59% and 24% respectively. The company will publish its full year numbers next week, and given the price action of the stock today, traders clearly have high hopes for the numbers.  

Rolls Royce shares are in the red again as Credit Suisse trimmed its price target for the struggling engineering company to 200p from 210p. Last week, Rolls Royce registered a first half adjusted operating loss of £1.67 billion, which was a far greater loss than what equity analysts were anticipating.

Wizz Air have downgraded their outlook for the third quarter. For the three month period, the airline now expects to operate at 60% capacity, while it originally had intended to operate at 80% capacity. The airline industry continues to endure turbulence as some people are worried to travel on account of the changing nature of the pandemic, and quarantine rules are a factor too. Wizz warned that its capacity plans for the third quarter might be reduced further, depending on the environment. The low-cost airline said it might consider parking some of its aircraft during the winter season in a bid to conserve cash, not that it has any liquidity issues, but it might make more sense to curtail activity depending on demand.           

Yesterday, it was announced that the AstraZeneca drug, which has the potential to be a vaccine for Covid-19, has been entered into a late-stage clinical trial in the US. The pharma giant is hoping to enrol 30,000 individuals to participate in the trial. AstraZeneca has expanded their agreement with Oxford Biomedica to mass produce its potential vaccine for the coronavirus.        

US

The major indices are a litter higher as the US posted encouraging manufacturing data. The final reading of the manufacturing PMI report for August was 53.1, which was the fastest rate of growth in two years. The ISM manufacturing report was 56 – its fastest rate of expansion since early 2019. The internals of the ISM report were broadly positive too as prices paid, new orders and the employment components were 59.5, 67.6 and 46.4 respectively.     

Zoom Video Communications shares have surged on the back of the impressive second quarter numbers. EPS was 92 cents, and that was far greater than the 45 cents that equity analysts were expecting. Revenue rocketed by almost 170% to $663.5 million, which was comfortably above the $500.5 million forecast. The firm has benefitted greatly from the jump in the number of people working remotely. Zoom has been one of the few companies to actually thrive amid the pandemic, and it is very bullish in its outlook. The company predicts that third quarter EPS will be between 73 cents and 74 cents, and the forecast was 35 cents. Revenue is now expected to be between $685 million and $690 million, and keep in mind the expectation was $492.9 million.  

Tesla shares are a touch lower as it was announced the company plans a $5 billion stock offering. It appears the auto-maker is looking to cash-in on the recent bullish run on the stock price.

It was reported that Apple contacted its suppliers about building 75-85 million 5G phones. The tech giant is tipped to launch four new phones in October. Not only are Apple shares higher, but chip-makers like Texas Instruments, Qualcomm and NVIDIA are up too.

FX

The US dollar index dropped to a 28 month low earlier in the day, but it has clawed back much of the earlier losses. Last week, Jerome Powell, the Federal Reserve chair, announced the Fed will be changing its inflation policy to an average target of 2%. It seems as if the US central bank is keen to press ahead with its very aggressive monetary easing policy, even if inflation pushes above 2%.

EUR/USD traded above 1.2000, which was its highest level since May 2018. The move was driven by the weakness in the dollar. The manufacturing PMI reports from the eurozone were mixed. The updates from Spain and France showed negative growth, while the reading from Germany showed modest expansion between July and August. The headline CPI rate in the eurozone fell to -0.2% from 0.4% in July, so demand in the bloc is suffering.

GBP/USD hit its highest mark since December 2019. The move was largely dollar driven but the UK manufacturing PMI helped too. The final reading for August was 55.2, which was only a touch below the July report.   

Commodities

Gold is up on the day but it is off the highs of the session as the US dollar has pulled back some of its losses. The earlier weakness in the US dollar helped the commodity hit its highest level since mid-August. In the past few sessions, the metal has produced a series of higher lows, so the wider bullish trend is still intact. If the bullish move continues it might retest the $2,000 mark.  

WTI and Brent crude are in demand thanks to the better-than-expected manufacturing figures from China. The Caixin survey of Chinese manufacturing was the strongest in almost a decade, and that in turn boosted the energy market. China is the largest importer of oil in the world, so traders feel the country has turned a corner with regards to its manufacturing sector.