Having followed US markets lower in the last few days, European markets are now following them back up again today with those most beaten down leading the charge, namely the housing and tech sectors.
The FTSE 100 was the best performing European index today following a better than expected Trade balance showing a deficit of -9.1bn. This is another bit of proof that the UK recovery is widening its scope beyond consumer spending and rising house prices following yesterday’s surprise boost to manufacturing production. As the economic recovery in Britain spreads to a wider footing, the need for monetary stimulus from the bank of England is reduced.
Greece announced it will issue five-year bonds tomorrow, the country’s first bond issue since 2010. The country defaulted just two years ago so presumably Greek banks will be the biggest recipients. It’s hard to imagine who in the broader investing public would want to take the risk of a repeat haircut.
Following on from their purchase of French DIY chain Mr Bricolage, Kingfisher received a broker upgrade from UBS today making the stock one of the day’s biggest risers.
Burberry is higher as the appointment of new CEO Christopher Bailey has been well taken. The stock is also sensitive to moves from China and the FTSE China A50 was up 2.6% yesterday.
Royal Mail were down today on the company’s announcement it is being probed by Ofcom, stating that the investigation relates to “certain changes to Royal Mail's Access contracts, following a complaint by TNT Post UK.”
US markets have been trading cautiously higher today continuing yesterday’s moderate rebound with good results from Alcoa easing the mood ahead of the release of the FOMC minutes.
Alcoa helped ease concerns of the upcoming earning season today smashing earnings per share estimates with an EPS of $0.09 against expectations of $0.05. At only 1.06 times tangible book, the company is a value play and should continue to perform well if the switch out of growth stocks continues.
The beginning of earnings season has had investors questioning the high valuations of some parts of their portfolio. Naturally, there’s a good chance the best performers from 2013 will be those with the highest multiples. General consensus is for an unimpressive earnings season which would see valuations stretched even further so it makes sense to trim some holdings ahead of time.
The key event for the US session today is the FOMC minutes. Expectations for tapering have been somewhat steady since the first official announcement was made. Most people believe $10bn in bond purchases will be cut each month in ‘measured steps’ at each meeting until we hit zero. The greater volatility is seen in expectations for the timing of rates rises once the tapering has finished.
These minutes should give some further clarity, now that the unemployment rate has been dropped as forward guidance, what data the Fed is using to rate the performance of the US economy and thus when rates are likely to rise.
There has not been a lot of volatility in FX markets today with investors awaiting FOMC minutes.
There has been some weakness in the yen due its recent strong negative correlation with equity markets.
Gold, silver and copper all dropped today
Talk of energy-supply disruptions between Russia and Ukraine has kept Brent and WTI crude prices bid again today, both at their highest levels for April.
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