The drop in the pound has helped the FTSE 100.
Europe
The British equity benchmark is internationally focused and the slide in the pound has helped the market hit its highest level since early February. The geopolitical mood is improving after the historic meeting between North and South Korean leaders, as it suggest the two nations are on the road to peace.
RBS announced an impressive jump in profits, but investors remain nervous about the US Department of Justice fine that is still hanging over the company. The majority state-owned bank saw profits surge by 205% to £792 million, which was comfortably above the £319 million that traders were expecting. Cost cutting and a fall in litigation fees helped profits rise. The balance sheet improved too as the common equity tier (CET1) increased to 16.4%, up from 15.9%, and this is likely to boost investor confidence in the long-run. Yesterday Barclays were hit with an enormous fine from the DoJ relating to the toxic mortgages pre-credit crisis, and traders are tense that RBS is in for something similar.
RBC lifted its price target for easyJet from 1700p to 1800p. EasyJet’s shares have been in a bullish trend since October 2016, and from a technical point of view we have yet to see any signs of the positive move coming to an end. Shares in easyJet are up 3% at 1590p.
Carpetright have been given a lifeline after it entered into a company voluntary arrangement (CVA) yesterday. The agreement was reached with its landlords and it essentially prevents the company going into administration. Carpetright have agreed to close 92 stores and cut 300 jobs in order to enter into the CVA. The troubled retail still has a tough road ahead of it, and the CVA might pave the way for additional restructuring.
US
US equity markets are this afternoon as the economic and political sentiment is improving. The pledge to end nuclearisation on the Korean peninsula has added to the bullish sentiment in equities. The announcement shows that political relations are heading in the right direction in that part of the world.
Tech stocks like Amazon, Intel and Microsoft are all higher today after they all reported solid figures after the closing bell last night. For some time now, traders have been calling Amazon overstretched, and now the stock has hit another record high on the back of last night’s results.
The US economy grew by 2.3% in the first-quarter, while economists were expecting growth of 2%, and that compares with the previous reading of 2.6%. Keep in mind that yesterday the jobless rate dropped to its lowest level since 1969. This highlights the strengthen of the US economy, and adds weight to the argument the Federal Reserve should hike interest rates three more times this year.
FX
GBP/USD sold-off sharply after the UK revealed its slowest quarterly growth rate since 2012. On a quarterly basis, first-quarter growth came in at 0.1% down from 0.5%, and economists were expecting 0.3%. The construction sector took a knock after the collapse of Carillion in January, and it would appear the ripple effect has taken its toll on the wider economy.
EUR/USD is a touch softer today as some of the eurozone economies revealed underwhelming growth figures. French first-quarter growth was 0.3%, which was slightly below the consensus of 0.4%. On a yearly basis, Spanish GDP grew by 2.9%, and that was a slower rate than the previous reading of 3.1%. Today’s figures confirm the slowdown in economic momentum that Mario Draghi, President of the European Central Bank, mentioned yesterday.
Commodities
Gold bounded back a little today after dropping to a six-week low yesterday. The short covering by traders today is clearly strong, as the metal is higher despite the firmer US dollar. The metal has spent much of the past two months in a range of $1305 and $1355. Next week traders will be focusing one the Fed meeting on Wednesday and US non-farm payrolls on Friday. The events could snap gold out of its range.
WTI and Brent Crude oil price are largely unchanged on the day as trader are still concerned about heightened political tensions in the Middle East. There is talk President will introduce sanctions against Iran, and that decision might be made next month. The oil market isn’t too far away from multi-year highs given that Iran could be in line for financial punishment, some traders don’t; want to get caught short.
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