market relief

Stock markets are higher this morning as dealers are keen to snap up relatively cheap stocks. 

The warning from Daimler yesterday that profit might fall due to China’s tariffs on US vehicles weighed on European sentiment, but traders have changed their tune this morning. Given that trade tensions haven’t dissipated, the optimism might not last long.  

British homebuilders are higher this morning after investment and research bank Liberum announced that sensitivity to UK house prices is exaggerated. Stocks like Barratt Development, Taylor Wimpey and Persimmon are in demand after they all sold-off yesterday on the back of the slightly hawkish update from the Bank of England (BoE). Essentially, Liberum feel yesterday’s sell-off was overdone and the British housing market won’t suffer that much should interest rates rise.

BP and Royal Dutch Shell shares are in the red as traders await the decision from Opec. There is speculation that output will be boosted by between 500,000 and 1 million barrels per day. Saudi Arabia are keen to ease up on the production freeze, but Iran are opposed to such a move. Russia, who are not in Opec, want to lift output, so it looks like we could be in for lower oil prices in the near term.

Equity traders are in risk-on mode today and as a result, stocks like GlaxoSmithKline, AstraZeneca and British American Tobacco are lower today. When dealers are willing to take on more risk, it is common for pharmaceutical and tobacco stocks to lose ground as they are deemed to be defensive stocks.  

The US dollar index has dipped again as traders take their profits. The greenback slid yesterday after the US released a disappointing Philly Fed manufacturing report, and the downward move in the greenback is continuing today.

GBP/USD is extending yesterday’s gains as the slightly hawkish update from the BoE still resonates with traders.

EUR/USD is taking advantage of the slide in the US dollar. France and Germany revealed manufacturing and service reports, and they were largely mixed. The updates suggest the region is still going through an economic slow patch.

Red Hat will be in focus after the stock sold off heavily in after-hours trading last night. The tech company released first-quarter figures yesterday, and the earnings per share topped expectations, but the guidance fell short of forecasts. The stock has been in a solid upward trend since February 2016, and the pullback might entice new buyers.

We are expecting the Dow Jones to open up 134 points at 24,596 and we are calling the S&P 500 up 14 points at 2,763.

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