UK & Europe

Stocks in Europe pulled off the lows in afternoon trading but remained down on the day. Most sectors were in the red but healthcare and basic resources led the decliners on the STOXX Europe 600 index.

European healthcare stocks have been caught in the storm of a US biotech sell-off. Another attack on price gauging in the industry from presidential hopeful Hillary Clinton puts pricing power in the industry at risk. Shire and Hikma Pharmaceuticals are amongst the top fallers on the FTSE 100 whilst Qiagen in Germany was a top faller in the Stoxx 600 Healthcare euro price index.

The FTSE 350 Mining Index is off by over 2% from the open. Poorly-received earnings from Glencore on Wednesday and lower oil prices continue to weigh on commodity-sensitive shares.

CRH was top riser in the FTSE 100 after reporting a rise in first half profits to 407m euros, raising its interim dividend and forecasting a continuation of growth trends into the second half. CRH is another company which (like the rest of us) is uncertain of the medium term effects of Brexit, but has not seen any impact on its business so far.

 

US

US stocks were flat in early trading on Thursday. An upside surprise in durable goods orders and well-received earnings from Tiffany were offset by sharp losses amongst discount retailers Dollar General and Dollar Tree after quarterly sales missed estimates.

Biotechs including heavyweights Amgen, Biogen and Celgene stabilised on Thursday after Wednesday’s drubbing. Mylan, at the centre of the controversy, offered a discount program for its EpiPen treatment following Hilary Clinton’s accusation of price gauging. Still, there was no significant biotech rebound and shares will likely remain under pressure throughout the US presidential race. Her statements reaffirm a fear in the industry that a Clinton presidency would see a serious crackdown on pharmaceutical price gauging.

 

FX

The euro shrugged off disappointing business survey data to trade higher against the dollar and the British pound. German IFO data missed across the board in a clear sign that German businesses are rattled in the wake of the Brexit vote. It wouldn’t be without president, given recent actions from the Bank of England for the ECB to ease policy on survey data. However, the IFO appears at odds with PMIs, so without a clear signal, action at the September ECB meeting is unlikely.

The US dollar has remained contained within a range of last Friday’s lows and Monday’s high ahead of Janet Yellen’s speech at Jackson Hole on Friday. On Thursday the dollar gave up its gains despite data showing better than expected durable goods orders and an unexpected drop in weekly jobless claims.

 

Commodities

A weaker dollar and news that Iran has been in discussions with Ecuador to work to stabilise oil prices helped crude oil trade higher on Thursday. Attempts to push Brent below $49 per barrel have failed in the past three days. The relative buoyancy of prices, despite a surprise build in weekly US inventories goes up against the belief of oil trader Phibro CEO who recommended shorting the market at $50. Chinese crude stockpiles have fallen to the lowest in more than 3 years. A government crackdown on tax evasion amongst teapot refiners may already have begun to curb import demand.

Gold saw an intraday breakdown below $1320 per oz, despite modest weakness in the dollar on Thursday. Precious metals have fallen in the lead up to Jackson Hole on the risk that Janet Yellen reaffirms hawkish statements recently made by other Fed members, including Ester George on Thursday.

 

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