market relief

European stock markets are in negative territory as the rate of decline is picking up as we approach the end of the trading week. 

Europe 

There was a sense that things weren’t too bad in terms of sentiment in the morning, but as we approach the weekend, the nerves are beginning to show. The feeling is clear that traders want to trim their positions ahead of the closing bell.

The owner of the Daily Mirror, Trinity Mirror is to acquire Northern Shell, which own the Daily Express, in a deal that is worth nearly £127 million. The buyout will reduce costs up to the tune of £20 million per year. Consolidation in this year is no surprise seeing as digital media is eating into print media’s market share. Shares in Trinity Mirror are up 7.6% today.

Talk Talk are in the red again as investors are still spooked by yesterday’s news the about a profit warning, a reduction in the dividend and the announcement of plans to raise £200 million through a stock issue. The company does have ambitious plans to offer a fast fibre optic broadband service to over 3 million premises around the country, but traders remain concerned about the financial health of the firm. The share price has been falling since 2015, and there are no sign of a turnaround in sight.  

US

US stocks have rebounded and the Dow Jones, S&P 500 and NASDAQ 100 are all higher today. Traders are covering short positions and some are snapping up bargains, but seeing as the volatility index (VIX) has dropped slight, the fear hasn’t fully left the market.

The short-lived government shutdown in the US left little impression on investors, as their concern is about another potential decline. The deal that was reached has pushed the debt ceiling issue back one year, adds to the political certainty in the US.

The US index futures haven seen some serious swings during market hours and out of market hours. The lows that were reached yesterday in trading hours were below Tuesday’s lows, so this could point to further losses.

FX

GBP/USD is weaker today as less than impressive economic updates from the UK prompted traders to sell the pound versus the greenback. In December, UK manufacturing output cooled while construction output contracted. In the three months until January, the UK economy grew by 0.5% according to the NIESR, which was slightly below the 0.6% growth in the previous reading.

EUR/USD is slightly lower on the day as a lack of volatility in the US dollar has left the currency pair trading in a small range. It has been a quiet day in terms of news flow from the eurozone, and the US so traders had little to cling onto. The very brief US government shut down had little impact on the US dollar.

USD/CAD jumped to its highest level since late December, after Canadian unemployment ticked up to 5.9% from 5.7%. The wage growth rate increased to 3.3% from 2.9%, as the minimum wage jumped in Ontario. Higher earnings came at a cost as 137,000 part times were lost, and this put pressure on the Canadian dollar.  

Commodities

Gold is in the red as the firmer US dollar is keeping the metal under pressure. Yesterday the commodity dropped to a one month low and it is losing ground today so we could retest 1307. This negative move in gold was triggered last week when the US posted a respectable jump in average earnings, which prompted fears about four interest rate hikes this year.

WTI and Brent Crude oil is lower again as the old fears about over-supply still persist. During the week, the US revealed a daily output topped 10 million barrels per day (bpd) - a record high. Iran who currently produce approximately 4.4 million bpd, are looking at ramping it up by an additional 700,000 bpd. The relatively high price of oil has encouraged additional production.

WTI has dropped below $60 per barrel for the first time in six week as selling pressure increases.

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