Europe

After last night’s surge in the US, markets in Europe picked up the baton after yesterday’s disappointing close with a strong recovery as trade tensions subsided in the wake of a toning down of the recent rhetoric from US officials, and the willingness of Chinese officials to engage with the US on some of their more immediate concerns.

The FTSE100 has led the way in Europe closely followed by the DAX, not unsurprisingly given how both indexes have also borne the brunt of recent losses on trade war concerns, nonetheless we have seen some profit taking on today’s gains after US markets rolled over soon after opening higher.

GlaxoSmithKline is leading the gainers on the news it has agreed to buy out Novartis 37% stake in its own consumer healthcare joint venture, for $13bn, only days after pulling out of the bidding process for Pfizer’s consumer business. With sales of £7.8bn the business has shown consistent growth over the past few years, and CEO Emma Walmsley will no doubt be hoping that trend continues. To help recover some of the costs of the transaction the company is looking at selling off some parts of its health care business and other consumer nutrition products, in order not to overstretch the balance sheet too much.

This renewed focus on consolidation and keeping control of costs is likely to continue in a sector that is likely to see margins come under further pressure in the coming months and years, particularly if the recent joint venture by Amazon and Warren Buffet’s Berkshire Hathaway is successful in driving down health care costs across the industry.

We’ve also seen gains in carmakers with Volkswagen, Porsche and Daimler all having a decent day as concerns over tariffs subside, though BMW’s gains have been tempered by reports that it was being sued over the installation of defeat devices in US diesel vehicles.

Plumbing and heating specialist Ferguson is also having a decent day after reporting better than expected revenues for the half year driven by a buoyant US business. Profits rose 15% while revenues came in above $10bn, an increase of over 10%. The company also announced a hike in the dividend as well as a 4% special dividend, sourced from the proceeds of the $1bn sale of its Scandinavian business Stark Group.

In the retail sector Swedish clothing giant H&M reported its worst performance in over a decade for Q1 sales as unsold inventory prompted a significant markdown in margins as the company cut prices to shift the backlog. This has seen UK retail stocks lag behind today’s surge in European stock markets, as the difficult retail environment continues to keep pressure on margins, with Next and Marks and Spencer’s underperforming the wider market.

US

After initially opening higher, US markets have slipped back from their intraday highs and appear to be pausing for breath a little after yesterday’s strong gains. This higher open has provided an opportunity for some light profit taking in early trade. On the economic data front consumer confidence for March showed a modest slowdown from the February numbers, coming in at 127.7, down from 130.00.

FX

It’s been US dollar strength across the board today as tensions over trade continue to abate. The euro has slipped back a little despite making a new high for the month as weaker expectations around inflation prompted some profit taking.

Some dovish comments from ECB members Liikanen from Finland, as well as Slovakia’s Jozef Makuch also cast doubt on the consensus view that we could see the asset purchase program come to an end by year end. When import prices in Germany decline 0.6% it does suggest that economic activity in Europe’s largest economy is showing little sign of increased demand and higher prices.

The pound has had a poor day, slipping back sharply on the back of some month end selling interest albeit against a backdrop of another what looks set to be another decent monthly gain.

Commodities

The recovery in the US dollar has seen gold prices slip back as the rise in stock markets takes away some of the lustre from its recent gains.

Crude oil prices still appear to be struggling to make new highs despite remaining fairly well supported on the back of recent news flow, which has seen prices rise to their highest levels since January this year.   

CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.