European equity markets have largely shrugged off the rather predictable rejection of a bank deposit levy from Cypriot lawmakers to post moderate gains in today’s trading. After claiming no interest in a ‘plan B’, policy makers have been forced back to the drawing board to explore other options that keep Cyprus in the Euro
area, with speculation of a ‘Russians to the rescue’ gaining momentum in the absence of any other offers.
In the UK the mood has been less optimistic. Traders gave a muted response to George Osborne’s budget statement and a response from Ed Milliband that bordered on the ridiculous. The only notable positive moves coming from the house builders - Barratt developments, Persimmon and Taylor Wimpey all surged on the announcement of a ‘Help to Buy’ scheme, providing shared equity loans for new build properties.
Holders of Smiths Group welcomed news of a 6% increase in dividend today, after posting a 6% increase in half-year headline revenue to £1.4 billion, giving way to a pre-tax profit of £223m. Annual figures from Greggs were a bit of a mixed bag, with total sales up 4.8% to £735m, but the opening of 100 new shops in the period putting like for like sales down 2.7% and profits down 2.2% at £51.9m. .
Kazakh miner Eurasian Natural resources (ENRC) has been dragged into the red for 2012, largely affected by a $1.5 billion impairment from weak aluminium prices and a write down to the value of its African operations Pre-tax losses of $550m forced the firm to scrap its final dividend.
EDF energy has tried to lean on ministers to agree on subsidies for the proposed £14bn Hinkley Point Nuclear plant in Somerset. The French firm have warned that agreements over funding costs are compromising plans for Britain’s first Nuclear facility in decades, with the potential to produce up to 7% of the UK’s electricity.
US markets opened higher on the bell, reversing drops for the last 3 days as investors focus their attention back on home soil with the Fed’s monetary policy
decision and subsequent comments. Initial estimates have indicated the Fed will leave asset purchase rates untouched until at least Q4 of this year.
Phone maker Blackberry was well bid in early trading after a broker upgrade from Morgan Stanley, a welcome backing to its Blackberry 10 handset. Adobe reported sales that exceeded expectations for the first quarter, the results came on the same day that Executive VP Kevin lynch handed in his notice to the firm and will leave by the end of the week. Initial market reaction remained positive.
Lennar Corp rose after posting first quarter earnings ahead of expectations, while FedEx fell over 5% in response to a lowering of its 2013 earnings forecast as consumers shift towards cheaper overseas shipments.
The Euro is generally better bid today as the ECB pledged to provide liquidity to Cyprus as it scrambles to try and find a solution to its bailout crisis, with currency traders betting that a deal is now more likely. Whether a deal emanates from a repackaged Eurozone bailout or from additional Russian lending is still very much uncertain.
Sterling has been pulled in all directions today, with initial pressure from the single currency sharply reversed by the MPC minutes which revealed a strong bias towards limiting any further quantitative easing. The comments provided further support to Mervyn Kings comments last week and pushed sterling to a 2 week high versus the Euro over the day, and came in spite of the Chancellor admitting in his budget speech that Britain would need to borrow more in the coming years than initially forecast.
The US dollar lost ground today ahead of the Federal Open Market Committee statement this evening, with no substantial changes to policy expected, traders interest will be peaked by any hints at an end date for its asset purchase program.
Both the Brent and WTI crude oil benchmarks moved higher today, clawing back yesterday’s heavy losses as traders reacted to the possibility of improved bail out terms for Cyprus and their potential consequences for the Eurozone. Inventory data at 14:30 showed an unexpected drop of 1.3m barrels of WTI vs expectations of a 2m barrel gain in stocks, though market reaction to the data was reasonably muted.
The recovery in the Gold price has seen the precious metal re-establish support at the $1,600 level as investors scramble for safety in the face of an uncertain Eurozone and global inflationary pressures. Traders tempted to take long trades with stops just beneath this level will be wary of the potential for sharp, erratic moves as the Cypriot tale plays out in the coming days.
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