Profit-taking has set in after a strong run this week, with investors keen to lock in some gains ahead of the weekend.

Europe

However, the positive trend in European equity markets in recent weeks has been restored, and the bullish sentiment could be set to continue next week.

Carpetright have impressed investors by announcing plans to raise £60 million from a share issue. The retailer has been severely struggling recently, and this move would give the company some much-needed breathing space. Carpetright would use the funds to pay off unsecured loans and kick-start its revised business plan. If the share issue is successful, it won’t solve all of the company’s problems, but it might put it on the road to recovery.

AstraZeneca shares sold-off today after the company confirmed that its profitable cholesterol drug, Crestor, is losing out to generic brands. The drug marker revealed that new brands like Fasenra and Lmfinzi are enjoying strong sales. Costs rose during the first quarter as the company boosted investment in launching new products. Investors were caught off-guard by the core earnings per share, which came in at 48 cents, while equity analysts were expecting 60 cents. The share price has largely been in an upward trend since June 2016, and if the positive move continues it could target 5,600p.

The Competition and Markets Authority (CMA) has kicked off its investigation into the proposed merger of Asda and Sainsbury’s. The regulator will ask for ‘any initial views’ from companies in the sector. The CMA will be assessing whether the merger would lead to uncompetitive practices in the industry. Sainsbury’s share are slightly lower today.

US

There continues to be uncertainty and confusion over how US trade talks with China are going. There was a report that China agreed to cut the trade deficit by $200 billion, but that was denied by the Chinese Foreign Ministry. Things are still up in the air in relation to how the trade negotiations will play out, and dealers are likely to remain cautious until we get clarification.

US equity markets have been strong in recent weeks. The Dow Jones and S&P 500 have been pushing higher since the start of the month, and both are comfortably above their 200-day moving averages. The NASDQ 100 has retreated from the two-month high that was reached during the week, and the Russell 200 has notched up another record high. Investors are getting used to the idea of US 10-year government bond yields being near seven-year highs. 

FX

EUR/USD enjoyed a push higher this morning after Germany announced a tick higher in both PPI and WPI. The April report for PPI rose to 2% from 1.9%, and the WPI report jumped to 1.4% from 1.2%. If prices are rising at producers and wholesalers, it could be an indication that demand is picking up, which would be positive for the euro. The continued dominance of the US dollar in the afternoon sent the currency pair lower. If the month-long bearish move continues, it could target 1.1700.

GBP/USD experienced low volatility today as there were no major economic announcements from the UK or the US. The currency has been trading in a relatively tight range this week, and it is showing no signs of snapping out of the recent downtrend. 

USD/CAD surged after Canada announced a slide in inflation. The headline CPI rate fell from 2.3% to 2.2% in April – economists were expecting it to remain at 2.3%. The recent strength of the US dollar, coupled with a slide in the Canadian cost of living, drove the currency pair higher. 

Commodities

Gold suffered this week at the hands of the jump in the US dollar. Traders feel the Federal Reserve might tighten monetary policy at a faster rate than expected, and this is hitting gold. The metal fell to a five-month low this week, and while it is below its 200-day moving average at $1,306, the outlook is likely to be negative.

WTI and Brent Crude have handed back the sizeable gains they made during the week. Recently the oil market hit fresh 42-month highs, and today we are seeing a minor pullback. Dealers are worried about future oil supply, as the US is looking to reintroduce sanctions on Iran – one of the biggest oil producers in the world.

At 6pm (UK time) Baker Hughes will release the weekly US active rig count, and the consensus estimate is 800, and that compares with last week’s 844.

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