Stock markets are higher as trade tensions have wound down a little. 

Europe

The US and China are not any closer to resolving the trade spat, but the language from Washington DC is certainty less aggressive than it has been in recent weeks, and this has encouraged traders to snap up equities. 

Serco shares have fallen today after the company lowered its full-year revenue outlook, however the firm left profit guidance unchanged. The old forecast was for revenue to be between £2.8 billion and £2.9 billion, and now the group anticipates it to be between £2.7 billion and £2.8 billion. In 2014, Serco revealed a turnaround plan, and it confirmed that the process is working, although it warned the conditions in the UK are ‘less than ideal’. The share price has been in decline since February 2017, and if the negative move continues it could target 90p.

BAE Systems confirmed it was awarded a £20 billion contract from the Australian government. The UK company saw off competition from Italian and Spanish firms to obtain the contract to build nine new navy frigates. The stock is higher today on account of the news.

Goldman Sachs placed Micro Focus on its potential mergers and acquisition list. The rally in Micro Focus has lifted the rest of the tech sector.  

US

US equity markets have been assisted by cooling trade tensions, bullish company updates and respectable economic indicators Steve Mnuchin, the US secretary of the Treasury, clarified that the US and China are engaged in a trade dispute and not a trade war. The softer language made investors less fearful, and it added to the positive sentiment. 

Shares in Nike hit an all-time high after the clothing retailer posted impressive fourth-quarter figures yesterday. Both the earnings per share and revenue metrics topped equity analysts’ forecasts.

Shares in Wells Fargo, Citigroup and JPMorgan Chase are all higher today after the banks boosted capital returns to shareholders in the form of dividend payments and share buyback schemes. 

The core PCE report for May came in at 2%, up from 1.8% in April. The reading is now at its highest level in over six years. The PCE is the Federal Reserve’s preferred measure of inflation, and the firm report suggests demand in strong. The US central bank is keen to keep hiking interest rates, and some traders are predicting a rate hike in September and December.

The Chicago PMI report ticked up from 62.7 in May to 64.1 in June, which is the highest reading since January.

FX

GBP/USD is firmer after the UK released solid growth figures. On a quarterly basis, the British economy grew by 0.2% in the first three months, an improvement on the previous reading of 0.1%. The latest mortgage lending and mortgage approvals reports were released today, and both figures topped economists’ estimates. Despite the positive move today, sterling remains in a downward trend versus the US dollar.

EUR/USD is higher after the latest eurozone inflation figures jumped from 1.9% to 2%, a 16-month high. In contrast, the core CPI reading slipped to 1% from 1.1%, and this suggests that demand isn’t actually that strong. The single currency has been in a downtrend versus the US dollar since April, and while it remains below the 1.1850 area, its outlook is likely to remain negative.

Commodities

Gold is slightly higher as the dip in the US dollar has given the metal an upward nudge. Yesterday, gold fell to a fresh six-month low and it has been in a downward trend since April. Now that the US core PCE is at its highest level since early 2012, it is likely that gold will remain under pressure, as the Fed might keep to its policy of hiking rates.

WTI and Brent crude oil continue to push higher as traders prepare for Iranian oil exports to be hit. As a way of putting pressure on Iran, the US is planning on slapping sanctions against the country, and it will deter other countries from buying their oil. This is driving up demand for oil, and Brent crude hit a multi-week high, while WTI hit another 43-month high.

 

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