The FTSE 100 has been held back by the impressive rally in sterling.

Europe

The firm pound is hurting the index, and big international companies like Diageo, AstraZeneca, GlaxoSmithKline and Reckitt Benckiser are all weighing on the index, due to the fact they all derive a sizeable portion of their revenue from many countries. Eurozone equity markets are higher on the report that China and the US will resume their trade negotiations next month, the discussion might not amount to much, but a cooling of hostilities has sparked buying.    

Boohoo shares hit a record high after the company raised its guidance. The online fashion house now expects first-half sales growth to be 33-38%, while the old guidance was for between growth of between 25% and 30%. The upgrade to the outlook has to be taken in the context of a struggling retail sector, and that makes the announcement from Boohoo all the more impressive.                   

CYBG shares sold-off sharply after the group confirmed it will have to increase its PPI provision to between £300 million and £450 million. The news sent the share price to an all-time low. The size of the provision could impact the firm’s balance, and the common equity tier ratio is tipped to be between 12.7% and 13.3%, while it was 14.6% over one year ago. The deadline for PPI compensation ended in August and the firm received ‘unprecedented volumes’ but hopefully a line should be finally drawn under the situation.

US

The S&P 500 hit its highest level since early August, as traders are optimistic about the US-China trade talks, which are tipped to take place in October. The ISM non-manufacturing reading came in at 56.4 – it’s highest in three months, and economists were expecting 54. The ADP employment reading and the jobless claims reports came in at 195,000 and 217,000 respectively. The solid economic updates added to the bullish sentiment. In the past few months there has been talk the Fed will cut rates next month, but in light of the solid services sector, and respectable jobs reports, the central bank might hold fire.                   

Slack Technologies shares have dropped as the firm expects second-half revenue growth to cool. The loss per share was 14 cents, while the traders were expecting a loss of 18 cents. Revenue jumped by 58% on an annual basis to $145 million, which topped the $140.7 million forecast. The firm anticipates third-quarter to be between $154 million and $156 million, and that would equate to growth of 46-48%, which would point to a cooling of growth.          

FX

GBP/USD extended its recent snapback and it hit the highest level since late July. Sterling’s recovery has been remarkable when you consider the chaos of British politics recently. Traders have clearly shrugged off the non-stop headlines in relation to Westminster and, and there is a view that sterling was over-sold earlier this week. Seeing as the possibility of a no-deal Bexit has been pushed back for now, traders are snapping up the pound as it is relatively cheap.

A broad dip in the US dollar has lifted EUR/USD. The dreadful German factory orders failed to hold to back the euro. In July, the orders level dropped by 2.7%, which was way worse than the 1.4% fall that traders were expecting. The German economy contracted in the second-quarter and with reports like this it might be on course for a recession.        

Commodities

Gold is in the red as traders are in risk-on mode, and they are shunning the perceived safety of the metal. Gold has enjoyed a bullish run lately, so a pullback isn’t a major surprise. Even though it has moved lower, it is still above the $1,500 mark, and the bullish trend is still intact.

WTI and Brent crude have rallied on the talk about the US and China continuing their trade discussions next month. The energy market is sensitive to the perceived health of the world economy, and should the trading relationship between the two largest economies improve, and that is likely to help the oil market. The energy information administration report showed that US oil and gasoline stockpiles dropped by 4.77 million barrels and 2.39 million barrels respectively.                           

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. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.