It has been a lacklustre session in Europe today as there wasn’t a clear direction for stocks. 

Europe

The DAX 30 is set to finish slightly higher, while the FTSE 100, CAC 40 and the FTSE MIB are on track to end the session a touch lower. The same stories are doing the rounds as US-China tensions are hanging over the markets, and the pandemic is playing a role in the broadly negative sentiment too. The US and China have engaged in a tit-for-tat consulate closure spat, and that has been the latest development in their strained relationship. In the grand scheme of things, the closure of a couple of consulates isn’t a major issue, but as far as traders are concerned, the relationship is heading down the wrong lane. President Trump has an election to contest in November, so he is likely to keep some pressure on the Beijing administration for the purpose of political point-scoring, and this worries equity dealers.

Belgium announced plans to introduce slightly stricter restrictions in relation to the health crisis. This has added to the fears about the possibility of a second wave. Hong Kong is re-imposing tighter guidelines, and parts of Spain have seen a jump in cases.     

Cairn Energy announced that it will sell its 40% stake in the RSSD project, which is off the coast of Senegal. The disposal could raise up to $400 million. The oil and gasoline exploration group said it will return at least $250 million to investors as a special dividend. It the current climate, a special dividend really stands out as many companies are curtailing their cash pay-outs.

The airline sector is enduring turbulence today on account of the UK government’s decision to impose a 14-day self-quarantine rule for people arriving from Spain. The Mediterranean country has seen an increase in the number of Covid-19 cases so Westminster reacted by introducing a two week self-isolation policy for people entering the UK after being in Spain. The country in question is one of the most popular holiday destinations for Brits, so that has impacted the tourist trade. Ryanair, have already confirmed the update from the UK government has a slight negative impact on bookings. EasyJet, Ryanair, IAG – the parent company of BA and Iberia, and TUI are all lower this afternoon.

Polymetal, Russia focused mining group, has received a boost by Jefferies, the bank raised its price target to 1,785p from 1,600p. Last week, the miner posted a 30% rise in second quarter revenue to $641 million, but gold production only ticked up by 1.7%, so it seems the metal’s price movement helped the group.

The rally in silver and gold has boosted the share price of Fresnillo, the Mexican mining group.

Pearson shares are in the red today. Barclays cut its price target from 555p to 550p, while Credit Suisse upped its price target to 500p from 445p. Last week the publishing group revealed a 17% fall in underlying first half revenue, and even though it anticipates a recovery, it remained uncertain in relation to the outlook.

Software provider Kainos Group, has seen its shares surge today as the company issued a bullish update and a special dividend was revealed too. Amid the pandemic, trading has been strong, so the group expects full year revenue and adjusted profit to be ahead of expectations. A special dividend of 6.7p was announced. In addition to that, the company is aiming to return to normal in terms of interim and final dividends.        

US

The mood on Wall Street is a little optimistic as talk of a $1 trillion stimulus package circulates. An agreement needs to be reached across the political divide, but traders are cautiously optimistic some sort of a compromise will be achieved in the end. The domestic political issues is taking precedence over the China story. The June durable goods report was well received as it showed a growth of 7.3%. The May reading was revised down to 15.1% from 15.8%.     

Moderna is developing a drug that they hope will become a vaccine for Covid-19, and testing for the treatment has entered the third phase. Developing a new drug is typically a slow process, but at least things are heading in the right direction. It was also announced the Biomedical Advanced Research and Development Authority – a US government body &ndash granted $472 million in funding to the pharma company.  

Hasbro shares have sold-off today on the back of the disappointing first quarter numbers. Revenue fell by 29% to $860.3 million, undershooting the $922 million forecast. Adjusted EPS was 2 cents, while equity analysts were predicting 23 cents. The toymaker saw high demand, but there were supply chain issues on account of the pandemic, which led to low levels of inventory.

FX

The US dollar has tumbled to its lowest level since June 2018. The Federal Reserve’s two-day meeting will begin tomorrow, and the interest rate decision will be posted on Wednesday. No change to the interest rate is expected ,but there is chatter that central bank will be reiterating the point that rates will stay extremely low for years to come, and that is putting pressure on the dollar.

EUR/USD has pushed above the 1.1700 mark on account of the weaker dollar. The German IFO business climate reading for July was 90.5, and exceeded the 89.2 that economists were expecting. The July report was the highest since February. It is encouraging to see confidence is on the rise in the eurozone’s largest economy.

It was a quiet day in terms of UK economic indicators. GBP/USD hit its highest level since early March because of the weak greenback.

AUD/USD is pushing higher thanks to the positive move in metals like silver, gold and copper. The Australian dollar is deemed to be a ‘commodity currency’, as when metals rally, the currency tends to move higher too.

Commodities

WTI and Brent crude are in the red as it seems that supply is ticking up. At the end of last week, the Baker Hughes report showed there was an increase of one active oil rig in the US, the first rise since March. It was reported that Saudi Arabia oil exports to China were 2.16 million barrels per day in June, and that was an increase of almost 17%. According to Reuters, Russia’s oil exports from western ports are tipped to jump by 36% in August, when compared with July.      

The fall in the US dollar has driven up gold and silver. Gold has hit a record high, while silver hit a level last week in September 2013. The commodities are quoted in US dollar so the weakness in the greenback makes them relatively cheaper to buy. Metals do not pay a dividend or interest payments, and because of that, some people have avoided investing in them. Nowadays, bond yields are depressed and a high portion of companies have either cut or cancelled their dividends, so the metals have seen their popularity rise recently. Palladium and platinum have hit their highest levels March and February respectively.

   

Disclaimer: 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.