The positive mood in Europe has waned after US markets turned lower. 

Europe

Equity benchmarks pushed higher this morning, but have faded towards the close as investors take their cues from their American counterparts.

Prudential revealed plans to demerger M&G investments into a separate listed company. The move will allow M&G Prudential to focus on Europe, while Prudential will specialise in Asia and the US. The rationale is to allow the two distinctive businesses pursue their own strategy. Shareholders will receive stock in the two business once the demerger is complete. The transaction will be partially funded by the £12 billion sale of Prudential shareholders’ annuity portfolio to Rothesay Life. Prudential’s share price gapped higher this morning, and if the bullish sentiment continues, it could retest 1,990p.

Morrisons revealed a solid set of numbers, but the stock still slid throughout the session. The retailer has started sourcing produce locally and tailoring what’s on offer to certain regions in a bid a stand out, and it is working. Profit jumped by 11%, on the back of a 6% rise in revenue. The total dividend was boosted by 12.2% to 4.4p, and a special dividend of 4p was announced.

US

Growing fears of a trade war is weighing on US stocks, and indices like the Dow Jones are losing ground quickly. Dealers are fearful that China will react to President Trump’s tariffs by imposing levies on the aerospace industry, and Boeing shares have taken a hit.  

US PPI on an annual basis ticked up from 2.7% to 2.8%, meeting expectations. Core PPI also edged up, and now stands at 2.5%, and that compares with last year’s reading of 2.2%. When costs creep up at the manufacturing level, it usually indicates that inflation will edge up too, which adds to hawkish sentiment.

US retail sales dipped by 0.1% in February, while economists were expecting a reading of 0.3%, and the January report saw a decline of 0.3%. This suggests that demand is still soft. 

FX

EUR/USD is weaker on the session after Mario Draghi, president of the European Central Bank, stated that patience is required in relation to the recovery in the region. Mr Draghi also stated that inflation is still muted, and the firmer euro is adding to the subdued CPI level. Eurozone industrial output grew by 2.7%, down from 5.2%, against consensus expectation of 4.7%. 

GBP/USD is weaker on the session on account of the firmer greenback. There were no major economic announcements from the UK today, so sterling was pushed around by the US dollar.

Commodities

Gold has been nudged lower by the firmer US dollar. The yellow metal has been in a downward trend since late January, and it could stay under the cosh as the Federal Reserve are meeting next week. The US central bank is tipped to hike interest rates, and given the inverse relationship between the two, the commodity could remain weak. 

WTI and Brent Crude oil are weaker on the back of concerns about oversupply. OPEC stated they expect American output to rise again this year. The cartel foresees tighter production from its group and Russia, but US shale producers are likely to take advantage of the firmer price. OPEC now expects US oil production to increase by 2.7% this year, up from 2.3% last year. 

US oil inventories fell by 5.02 million barrels, while the consensus was for a build of 2.6 million barrels. Gasoline inventories dropped by 6.27 million barrels, and that compares with the 1.6 million barrel drop that investors were anticipating.

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