The FTSE 100 is being helped by the sell-off in sterling. 

Europe

The dip in the pound has made the internationally-exposed index more attractive to investors. Sterling slipped on the back of the fall in the inflation rate in the UK. Adding to the FTSE’s gains are higher metal prices, thanks to the London index’s relatively high proportion of natural resources stocks.

London metal exchange nickel jumped to a level not seen since December 2014, as traders continue to be worried about tensions surrounding Moscow. Russia is a major producer of nickel and aluminium, and traders are fearful sanctions against the country will leave supply dented. Miners like Glencore are higher on the back of the metal’s price rise.

Hammerson shares are higher today after it walked away from a proposed merger with Intu Properties – which is lower today. Real-estate investment trusts have been coming under pressure in recent years due to a shift in shopping patterns. Falling footfall at retail parks and profit warnings from well-known high street brands are damaging the industry. A merger between the two companies would only have compounded the problem, and seeing as Intu is the weaker of the two companies, its share price is likely to remain under pressure.

Rio Tinto share are in demand after the frim reported a solid trading update. Iron ore production increased by 5% on a year-on-year basis. The group is still on track to achieve its target of shipping between 300 million and 340 million tons of iron ore this year. Iron ore is a key component in steel making, and the solid growth figures from China would suggest that its demand for iron ore will be high.

US

US equity markets are mixed this afternoon as it has been a quiet day in terms of news. There has been some profit-taking after New York had a strong finish last night. The hasn’t been any new negative news, but that doesn’t mean the concerns about Russian sanctions, Chinese trade tensions and uncertainty in the Middle East has gone away.

Morgan Stanley shares are higher today after the bank revealed a strong set of quarterly figures. Earnings per share were $1.45, which was comfortably above the $1.25 consensus. Revenue also topped estimates, coming in at $11.1 billion, against the consensus for $10.3 billion. Lately, trading revenue from banks has been mediocre, but both fixed and equity trading revenue exceeded estimates. Morgan Stanley is the last of the major US banks to reveal its figures, and it was one of the better updates from Wall Street.

FX

GBP/USD came under pressure after the UK inflation rate slipped to 2.5% – its lowest level since April 2017. The decline in the cost of living encouraged traders to exit long positions in sterling. The pound has enjoyed a positive run against the US dollar this month, but the lower-than-expected inflation numbers encouraged profit-taking. Now that the cost of living in the UK is sliding, and the average earnings are edging up, it should take some pressure off the British consumer.

EUR/USD recovered from the sell-off it endured after the eurozone inflation rate fell to 1.3%. Economists had been expecting the reading to remain unchanged at 1.4%. The dip in the inflation rate highlights the soft demand in the currency bloc. Despite this, the euro managed to push higher versus the US dollar. The currency pair has been range-bound lately, but while it holds above the April low of 1.2215 its outlook is likely to remain bullish.

Commodities

Gold has edged up as the US dollar is broadly unchanged on the day. The metal reached a one-week high, but it would need to clear $1,365 to retest the highs of 2018. Recently we have seen a clear formation of higher lows in terms of price action, but there isn’t a clear corresponding series of higher highs. While gold holds above $1,331 (50-day moving average) its outlook is likely to remain positive. 

WTI and Brent Crude oil reached fresh 41 month highs after the latest energy information administration (EIA) figures showed a drop in US oil and gasoline stockpiles. The oil inventories fell by 1.07 million barrels and gasoline inventories dropped by 2.96 million barrels. The energy market is already strained by uncertainty in the Middle East, and the EIA report just adds to the upward pressure.

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