market relief

European stock markets have been moving higher in the afternoon and some of the earlier losses have been reversed. 

Europe

Traders are taking on more risk and are content to snap up relatively cheap stocks. Traders’ attitudes may have changed, but the wider atmosphere of economic and political tensions haven’t. As of yesterday China has started imposing tariffs on a number of US goods, and the feeling that we are now in a trade war is still on the back of investors’ minds.

Sky shares are bucking the trend today as Fox stated Disney could buy Sky News. It would appear the Murdoch’s, who control Fox, are trying to sweeten the competition and market authority so they can acquire the remaining 61% in Sky. It was also suggested that Fox could ring fence Sky News if the takeover is approved. Sky shares hit an 18-year high last month, and it would appear the bullish trend is set to continue.

Randgold Resources stated its production outlook remains unchanged despite there being a strike at an operation in the Ivory Coast. The industrial action is taking place at two pits that saw a production output of 11% last year. The share price is up 0.15%.

BP shares are in demand after Barclays stated the oil company is its ‘top pick’ of the industry, and they reiterated their price target of 675p. The announcement comes less than one month before the oil giant will report its first-quarter results next month.  

US

US stocks are mixed as the Dow Jones and the S&P 500 are higher, and the NASDAQ 100 is in the red. Traders with a higher risk appetite are swooping in to pick up relatively cheap stocks, while others remain cautious. Yesterday the S&P 500 closed in correction territory – 10% off the record high. Whenever a market enters correction territory, some investors will start to worry about approaching bear market territory – 20% off the all-time high.

Amazon has bounced slightly after enduring a severe sell-off recently. The online retailer has come under fire from President Trump as he feels the tech giant isn’t paying its fair share of taxes.  The tech industry was the darling of the market at the start of the year, but now with the Facebook data scandal, talk of an EU digital sales tax and accusations against Amazon in relation to taxes, the sector has fallen out of favour with investors.   

FX

EUR/USD declined after manufacturing in the eurozone slipped to an eight month low. This is further proof the region is experiencing a cooling of economic growth. Spain, Italy and France all showed a cooling of the growth rate, while the relatively strong German economy showed no change. Today’s report fits in with a wider theme of slowing economic indicators from the currency bloc. The European Central Bank may look to keep its monetary policy loose if this trend continues, and that could put pressure on the euro.

GBP/USD has had a volatile session as underwhelming data from the UK and a swing in the US dollar dragged the currency pair about. Manufacturing in the UK slipped to its slowest pace since August, but the reading still managed to top economists’ estimates. There is talk the Bank of England will hike interest rates next month, but should the UK experience a cooling of economic growth like the eurozone, it may give central bankers pause for thought.   

Commodities

Gold is under pressure from the firmer US dollar and the risk-on attitude is also a playing factor in the negative move. In recent months gold’s inverse relationship with the US dollar has been strong, and today the jump in the greenback hit, denting the metal. Bargain hunting in the equity markets has also encouraged dealers to dump gold.

WTI and Brent Crude have bounced back after yesterday’s decline. The start of the trade war between the US and China yesterday knocked confidence in the market, and fears have subsided for now. The wider upward trend that has been in place since June still holds, and while the energy market holds above the March lows its outlook is likely to remain positive.

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