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London Markets Suffer As Europe Recovers

Published 24/07/2017, 16:06
Updated 03/08/2021, 16:15

Europe

The FTSE 100 is firmly in the red as we go into the close as the decline across Europe hit the London market hardest, but the continent has managed to largely reserve the negative move from this morning.

Ryanair's (LON:RYA) announcements that they may have to cut airfares further has sent their stock lower and that of easyJet (LON:EZJ) and BA’s parent, International Consolidated Airlines (LON:ICAG) too. Like with the UK supermarket price wars, it’s the customers than benefits and not the shareholders.

BMW (DE:BMWG), Volkswagen (DE:VOWG_p) and Daimler (DE:DAIGn) are in negative territory today after it was alleged that the car makers are colluding with each other over certain business practices such as supplier cost and diesel emissions treatment. The European car manufacturing is feeling the pressure today as investors remember all too well the costly fines that car makers have hit with in recent years. The EU antitrust body is looking into it, and traders are hanging about to see if any fines materialise. The sector will find it difficult to attract new investors while the investigation is ongoing.

US

US equities are lower on the day as the sell-off in Europe is weighing on sentiment across the pond. The allegations that Jared Kushner, the son-in-law of President Trump, colluded with representatives from the Russian government is also on traders’ minds. For now there is no great panic surrounding Mr Kushner, but it doesn’t entice buyers into the equity market.

The US posted some broadly positive economic indicators today. In July the manufacturing and services sectors reports were 53.2 and 54.2 respectively, and both represented expansion on the month. The existing home sales for July dipped to 5.58 million from 5.62 million in June. These reports are encouraging, but not the sort that would get traders worried about an interest rate hike anytime soon. Dealers are still divided over whether there will be another interest rate hike from the Fed this year or not.

Halliburton (NYSE:HAL) shares are off over 3% despite posting solid second-quarter figures. The oil services company swung to profit in the quarter, and the results came in ahead of expectations, but it still wasn’t enough to satisfy investors. The meeting between OPEC and non-OPEC members St Petersburg today has injected volatility into the oil price, and traders of Halliburton share will be keeping an eye on it.

FX

The EUR/USD lost ground today when you consider the bullish run it has been on recently, and the slower growth rate of eurozone manufacturing and services sectors it is hardly surprising. After several months of respectable growth, the manufacturing and services industries in the region are still expanding, just at a cooler rate. It’s nothing to get alarmed about, however it prompted some profit taking. The single currency is still comfortably above the $1.16 mark, and the strong upward trend is still unbroken.

The GBP/USD pushed higher today on the back of some weakness in the US dollar and the euro. The UK had no major economic announcements today, but the relative fragility of other major currencies made the pound attractive. Sterling is also attracting bargain hunters seeing as it rough ride last week on the back of the British CPI data. The pound is holding above the $1.30 mark which bodes well for the bulls given the wider upward move in the currency pair throughout 2017 its outlooks still looks steady.

Commodities

Gold is still reaping the rewards of the flight to quality factor as global equities continue their sell-off. The metal has traditionally befitted when stock markets are in the red, and when you combine that with fairly poor performance of the US dollar lately you can see why the price of gold is pressing higher. Today the metal hit a level not seen for nearly one month, and the while equity markets remain weak the commodity could remain in demand.

WTI and Brent crude oil are up on the day as OPEC and non-OPEC members meet in Russia today to talk about the production cut that they have in place. The major oil producers announced an extension to their production cut in late May, and the price of oil has tumbled over 10% since then, and now they are looking to rectify that. The group of oil producers called on Nigeria to comply with the production cut, and they asked other members to become more compliant with the coordinated cut. The group needs to have a united front if it wants to try and push up the price of oil.

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.

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