The FTSE 100 was helped by the plunge in the pound on the back of the Bank of England (BoE) update. 

Europe

The UK central bank voted 7 to 2 to hike interest rates by 0.25% to 0.5% - its first rate hike since 2007. The BoE omitted the sentence about increasing rates faster than expected, and that left traders thinking we won’t see another rate hike until autumn 2018. The rate hike was well priced in, but the dovishness of the statements and the press conference undid the pound’s recent rally.  

BT had an unimpressive second-quarter as revenue fell by 2% and profits declined by 4%. The TV department attracted 7000 new customers in the period, but that was a major drop-off when compared with the 63,000 it attracted in the same period last year. The drastic slowdown in growth spooked investors. Shares in BT have been sliding since the end of 2015, and if the decline continues, it may fall to 240p.

Royal Dutch Shell saw third quarter-profits soar as the downstream side of the business had a major contribution to the group. Given the size of Royal Dutch Shell, it’s refining and chemicals divisions helped the drive in profits, since the oil market has been downbeat for the past number of years. Now that oil has reached its highest level in over 2 years we would expect to see the upstream business to produce higher profitability levels in future earnings releases The stock hit its highest level since September 2014, and this rally could see it target the record-high of 2613p.

US

The Dow Jones, S&P 500 and NASDAQ 100 are in the red today as a bit of profit taking a kicked in. The US is in the process of unveiling new tax reforms, and it would appear that they aren’t as aggressive as Mr Trump initially planned them to be, and that is aiding the slight decline.   

US jobless claims dropped to 229,000 from 233, 000 last week - the consensus was for a reading of 235,000. This combined with the impressive jump in the ADP employment report yesterday has put traders in an optimistic mood for tomorrow’s non-farm payrolls report.

Facebook revealed solid figures last night as third-quarter revenues and profits were up 50% and 79% respectively – both figures topped analysts’ estimates. Advertisers keep flocking to Facebook as there was a 16% jump in user ship levels on the year. A clear majority of adverts that last up to 15 seconds long are being watched to the end - this is likely to keep advertisers coming back. The stock is down 2.7% due to profit taking – it hit a record high last night.

FX

GBP/USD sold-off heavily after the BoE did what traders call a ‘dovish hike’ – rates were raised but we may not see another interest rate hike from the UK central bank until well into next year. Increase in interest rates was well anticipated but the comments that followed the move put pressure on the pound. The BoE basically undid the interest rate cut that they introduced in August 2016. This isn’t the first step on the road to a series of hikes, the BoE have now gone from reverse to neutral.

EUR/USD has pushed higher after the US dollar dipped on the back of the leak of the US tax proposals. The reforms to the US tax systems weren’t as aggressive as the market was initially expecting. President Trump wanted to cut the corporate tax rate to 15%, but now it’s going to be 20%. Earlier in the session, German, Italian and Spanish manufacturing PMI reports all came in ahead of expectations. The French manufacturing sector kept expanding, but it narrowly missed the forecast. 

Commodities

Gold is ticking higher due to the softness in the US dollar and the slight pullback in US equities has also made gold more attractive. The leak in relation to the US tax reforms jolted gold higher – this was a correction due to the ground gold lost because of the talk of a very pro-business tax policy being introduced.  Gold is also going to be sensitive to the announcement of the new head of the Federal Reserve. Jerome Powell is widely tipped to take the top job.

WTI and Brent Crude oil are experiencing low volatility today, which makes a change. The oil market hit a level not seen in over two years yesterday, and after the sell-off on the back of the energy information administration (EIA) figures, the market has been trading sideways. WTI’s and Brent Crudes upward trends are still intact, and the fear about future supply levels are still doing the rounds.  

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.