market relief

Stocks markets in Europe are higher today as the bargain hunters move in.

Europe

For now the selling pressure has cooled, but traders are still cautious after the market endured several days of selling in a row. One positive day won’t erase the memory of the declines that we saw recently. As we approach the end of the year, we could see further selling pressure as investors look to square up their position before the year ends.

Royal Mail’s profits were boosted by the £106 million tax credit for closing its pension plan. That was a major contributor to the jump in profits the company enjoyed. The domestic parcel and letter delivery service saw revenue remain unchanged, and the international division registered 9% rise in revenue. The share price has been in decline since June 2016, and if the negative move continues it could retest the 370p region.

GKN shares are down 4.6% today after it was announced that the Kevin Cummings, the future successor to the CEO Nigel Stein, has left the company. The company also stated that it would incur a charge of £80 million to £130 million in relation to its aerospace division. The aerospace department incurred a cost of £15 million last month.  Two unexpected write-downs in quick succession has shaken investor confidence. The share price has gapped lower twice in less than five weeks, and if it breaks below 280p, it may target 250p.

 Royal Dutch Shell and BP have been hit by the announcement that the Norwegian sovereign wealth fund is going to cut its position in oil and gas stocks. The trillion dollar fund has about 6% of its assets tied up in energy stocks, and they are looking to unwind their position.  

 

US

The Dow Jones and the S&P 500 are higher today as we have seen funds flow back into global stocks. The US market haven’t been as caught up in the world-wide sell-off of stocks in the past week, they have come under pressure nonetheless. Traders are trying to figure out whether today’s positive move is just a bounce back or the beginning of the next upward move. US equities have enjoyed a very bullish run lately, so a pullback would not be a surprise.  

Shares in Wal-Mart hit an all-time high after the company posted a 2.7% jump in same-store sales, while the consensus was for an increase of 1.8%, it was the 13th-consecutive quarter of higher same-store sales. Earnings per share (EPS) were $1 and revenue was $123.18 billion while, analysts were expecting 97 cents and $121 billion respectively. The stock gapped higher today, and if the bullish sentiment continues, it could target $100.

US jobless claims jumped to 249,000 from 239,000 last week and the consensus was for a reading of 235,000. Industrial production rose by 0.9% in October, and economists were expecting to a see a rise of 0.5%, and the previous report was 0.3%.

 

FX

EUR/USD is lower today as there has been a broad push higher in the US dollar today. The annual inflation rate in the eurozone fell to 1.4% from 1.5%, in line with market expectations. Mario Draghi, the European Central Bank (ECB) chief, is worried about weak inflation in the region and this is further proof that additional monetary easing could be needed.

GBP/USD is higher today, and the slight tick up in UK retail sales helped the buying momentum.  In October, UK retail sales rose by 0.3% while dealers were anticipating to see a 0.1% rise. Now that UK inflation is steading, and wages and retail sales are beginning to tick higher, this may provide a solid foundation for the pound.

 

Commodities

Gold is yet again dancing around its 100-day moving average at $1279. The metal didn’t enjoy much of a move higher when global stock markets were falling in recent sessions, and now that we are seeing a more risk-on attitude from traders, the metal isn’t coming under pressure.

WTI and Brent Crude oil are slightly weaker today as the energy market has been experiencing relatively low volatility. Oil hasn’t recovered from the sell-off on Tuesday after the international energy agency cut their forecasts for global demand. That being said, the wider upward trend since June is still in place, and traders are still fearful the OPEC meeting at the end the month could see an extension to the coordinated production cut.   

 

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