Volatility in European equity markets has been low today as an absence of major macroeconomic news prompted some traders to sit on their hands. 

Europe

In light of the strong rally and the multi-month highs that were achieved in European indices recently, some investors are now taking a breather.    

Debenhams shares had a rocky ride today. In early trading, the stock rallied after Mike Ashley – who owns a 30% stake in the company, offered to underwrite the firm’s £150 million rights issue. A short while ago, it was announced that Debenhams rejected the offer from Mr Ashley, and that caused a severe sell-off in the stock. The struggling retail might have to resort to a debt for equity swap with existing lenders, which might wipe out shareholder value.

Unite Group confirmed that property valuations edged up by 1.5% on a quarterly basis, and the update today bodes well for the group’s outlook of between 3% and 3.5% growth. The group owns and manages student accommodation, and it stated reservations for the academic year 2019-2020 were currently 79%, and that was an improvement on the 77% one year ago. The stock reached another all-time high last week and if the bullish move continues it might target 1,000p.

Petra Diamond shares are higher this morning after Berenberg upped its price target for the stock to 23p from 22p

Melrose, Meggitt and Rolls Royce shares are in the red after Boeing announced on Friday to cut production of 737 Max aircrafts by 20% in light of the Ethiopian airlines disaster last month. The ripple out effect within the aerospace and engineering will equate to fewer orders across the board.   

US

The S&P 500 and NASDAQ 100 are a little lower today as traders lock-in some profit from last week’s positive run. It has been a quiet day in terms of economic announcements. The February factory orders report showed a 0.5% decline, while economists were expecting a drop of 0.6%, but the January report was revised from 0.1% to 0.0%. The report paints a picture a downbeat demand and doesn’t inspire confidence.

Boeing shares are in the red after Bank of America cut its rating on the stock to neutral from buy, and the Wall Street titan trimmed its price target for the company to $420 from $480. The Ethiopian airlines disaster involving the Boeing 737 Max aircraft was the reason behind the downgrade. 

FX

The US dollar index handed back a lot of last week’s gains. Saudi Arabia denied a report that they threatened to start selling oil in currencies other than the US dollar. The greenback in the global reserve currency, and major commodities are listed in terms of US dollars, and even the denial of the report rocked investor confidence in the currency.

EUR/USD has been given a lift by the sell-off in the greenback. Traders shrugged off the eurozone Sentix investor confidence report. The reading was -0.3, which was the fifth negative consecutive reading. On the bright side, the report was an improvement from the -2.2 reading in March.

GBP/USD was trading higher earlier today, as the pound was boosted by the weak US dollar. The Brexit uncertainty continues, and Prime Minister May is set to meet Emmanuel Macron and Angela Merkel tomorrow ,ahead of the EU summit  on Wednesday, whereby EU leaders will decide whether to grant the UK an exit extension or not. All sides are playing politics, but the reality is the EU 27 would be economically hurt by a no-deal scenario too. A vote of no confidence is being tabled against Mrs May in light of her handing of the entire Brexit process.    

Commodities

Gold has been pushed higher by the slide in the US dollar. There continues to be a strong inverse relationship between the metal and the greenback.  Gold recently struggled to break above the $1,300 mark, and should it hold above that level, it might retest the $1,324 area.

Oil has racked up a new five month high over supply concerns. OPEC are reducing output, the US have imposed sanctions against Venezuela and Iran, and conflict in Libya has all helped drive oil to its highest level since November.

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