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Dekeloil Public Dixons Carphone

Breakfast Today

"You can't keep a good market down. Despite its long list of woes, ranging from the IMF's growth forecast downgrade, the Senate delaying the Healthcare Bill, the second global Cyber Attack and Google's EU fine, US equities yesterday were firm from the start, recouping losses on Tuesday which saw the Dow Jones suffered its biggest drop in more than a month, to finish with all three-major average closing near the session's highs. They even shrugged off a National Association of Realtors report showing pending home sales in the US unexpectedly decreased for the third consecutive month in May, which is the latest in a long list of data that suggests US economic momentum is finally slipping. The Nasdaq led the way once again, with most giant tech stocks bouncing while its biotech index was also sharply up. In the wider market, Steel was an outstanding sector, driving the NYSE Arca Index up by 3.9% on hopes the White House will soon impose penalties on countries dumping in the US; Financials were also boosted following the Fed's approval of 34 banks' capital plans, which is now expected to release capital for higher dividend payouts; elsewhere Trucking and Housing saw strength, moving higher along with most of the other major sectors, while also Oils benefitted from an EIA reported detailing a sizeable weekly stock decline. Sceptical analysts, however, pointed out that any output decline was probably more the result of Tropical Storm Cindy which knocked out activity in the Gulf of Mexico last week, but has since come back on stream. Treasuries meanwhile continued to see modest weakness, taking the benchmark ten-year yield up by 3 basis points at 2.228%. Asia celebrated the US market performance, putting in convincingly gains across all its regional bourses. Australia's S&P/ASX 200 advanced over 0.9%, building on Wednesday its largest one-day gain in two weeks, with its banks amongst the best performers. Elsewhere, the Hang Seng was powered by demand for HSBC (HSBA.L) and Standard Chartered (STAN.L). The Nikkei gave back some of its early strength due to a firming Yen, while US tech advances boosted the demand for the heavily weighted South Korean KOSPI index. This optimistic mood was not shared during yesterday's European session, however, with Eurozone markets pulled down by a strong Euro, as it headed for its highest level in a year on traders interpreting Tuesday's ECB President's speech as paving the way for a scaling back of monetary stimulus, even if most still consider tapering itself is unlikely to commence before Q1'2018. Picking up the mood from Tuesday's falling overnight markets, the STOXX Europe 600 opened sharply down with techs, utilities and basic materials under most pressure. The surprise US rally, however, rebuilt confidence sufficient for the Index to eventually claw its way back to unchanged, led by recoveries in the FTSE MIB and IBEX 35, although the DAX and CAC-40 still closed with modest losses. The mood in London deteriorated once again as the Bank of England echoed its continental peer by hinting at a reduction in monetary stimulus. Sparking a 1% rise in Sterling by noting "some removal of monetary stimulus is likely to become necessary", the Governor also made it clear that economic conditions need to improve first. With lower oil prices seen taking the sting out of inflation figures, most traders still consider he will continue to do his utmost to defer such a move into 2018. UK macro data due today includes May Consumer Credit, Mortgage Approvals, and M4 Money Supply; traders will also be listening out for feedback from today's BBA Annual Retail Banking Conference, which lists senior speakers from both Government, BoE and FCA. The EU offers June Services Sentiment, Consumer and Industrial Confidence, Economic Sentiment Index and Business Climate data. The US will detail weekly Initial Jobless, Q1 GDP and Personal Consumption Expenditures, while the Fed's James Bullard is due to make a speech. UK corporates due to release earnings or trading statements include DS Smith (SMDS.L), Purplebricks (PURP.L), JD Sports (JD..L), Greene King (GNK.L), John Wood (WG..L) and John Laing (JLG.L). Theresa May's meeting with German Chancellor Angela Merkel in Berlin today ahead of the G20 summit in Hamburg may also provide some interesting Brexit soundbites, ahead of which London equities are seen simply riding on the back of the overnight markets. The FTSE-100 is seen rising 35-plus points during this morning's early trading."

  • 29 Jun 17

Ig Design Group James Cropper

Breakfast Today

US equities remained in a downbeat mood on Tuesday. The IMF lowered its forecast for the country’s GDP growth this year to 2.1% from 2.3% while also slashing its 2018 growth outlook to 2.1% from 2.5%, both well below the President’s 3% target. The Fund pointed to rising uncertainties regarding Trump's ability to squeeze his ambitious goals on tax reform and spending through Congress for their change. The news, later compounded with the US Senate delaying his Healthcare Bill and the spread of the second global Cyber Attack, deflated what was otherwise rather upbeat news from the Conference Board which detailed an unexpected improvement in US consumer confidence for the month of June. The S&P 500 posted its biggest drop in six weeks, but major tech stocks like Alphabet, Microsoft and Amazon once again were the worst hit, with investors pointing at heady valuations and asking, ‘what if?’ for the first time. This followed Google being slapped with a record US$2.7 billion fine by EU regulators over claims the Group favoured its own comparison-shopping service in search results. In cash terms this is not significant for Google, but that is not the point. ‘What if’ is asking whether international governments just might decide the EU has fired the ‘starting gun’ for much broader round of litigation, whereby they pick up the underfunded baton largely dropped by multiple families and private interest groups trying to link online technology and, in particular, social media, with many global woes ranging from terrorism, fraud and abuse. The extent to which such actions could stick and the size of the potential penalties imposed, of course remains to be seen but holds potential to, temporarily at least, puncture their share price ‘balloons’. In that respect, Janet Yellen’s speech at the Royal Academy yesterday evening, suggesting technological change has been harmful to many will ring a bell. Most of the other major US sectors saw only modest moves on the day, although some weakness was visible among semiconductor and utilities stocks, which reversed some of Monday’s moves. Treasuries also pushed sharply lower over the course of the day, with yields on the benchmark ten-year note up by 3.8bp at 2.188%. Other than the S&P/ASX 200, which rose on firmer mineral prices, Asia ended mostly slightly weaker this morning. Picking up the US mood, the Korean and Taiwanese benchmarks, which are weighted heavily in tech issues initially led the way, although the momentum was then picked up by the Hang Seng and Nikkei 225. Europe’s principal bourses also all moved to the downside yesterday. A speech from ECB President Mario Draghi was widely interpreted as paving the way for a scaling back of monetary stimulus, lifting the Euro to a 10-month high against the US$ and government bond yields in the process. The STOXX Europe 600 ended down 0.81%, with the FTSE MIB hit the worst as it gave back most of Monday’s gains, while the German DAX and French CAC40 Indices ended not far behind. London equities suffered less due to the FTSE-100’s heavy weightings of miners and oils, as crude oil prices rallied further and US$ weakness gave commodity stocks a welcome boost. Supermarkets also outperformed following a survey suggesting the sector achieved its strongest growth in five years. The overall mood, however, remained sombre with the consumer sentiment index tumbling to 106.9 in June, its second-lowest level since the summer of 2013, having plunged to 105.2 immediately after the UK general election. The CBI’s Distributive Trades Survey by contrast reported its retail sales balance at 12% in June, against projections of just 6%, although just 3% of respondents were forecasting an increase in sales volume for July. Joining the chorus, the BoE’s Financial Stability Report highlighted concerns that domestic consumer credit is growing too "rapidly" and, as a result, required UK lenders to increase their counter-cyclical capital buffers by 0.5% amid spiralling personal borrowings and anticipation of higher base rates. UK macro data due for release today includes Nationwide Housing Prices for June and another speech from Mark Carney at 14:30hrs BST. The EU details May Private Loans and its M3 Money Supply data, which is also followed by a speech at 14:30hrs BST, this time by the ECB President. US data scheduled includes May Wholesale Inventories and Goods Trade Balance, Pending Home sales and weekly EIA Crude Oil Stocks Change. UK corporates due to release earnings or trading updates include Bunzl (BNZL.L), Dixon Carphone (DC..L), Tullow Oil (TLW.L), Stagecoach (SGC.L), Kier Group (KIE.L) and Xafinity (XAF.L). There appears little that will brighten the mood in London’s equity market today, as traders’ focus on possible European Central Bank actions bringing forward a response from Mark Carney. The FTSE-100 is seen opening down 15 to 20 points in early business.

  • 28 Jun 17


Breakfast Today

"Having made a firm start during early trading, sentiment reversed as the session progressed to see the US major averages once again turn in a dull, mixed closing performance. Traders remain uncertain regarding the near-term outlook for equities after the Dow and S&P-500 touched record highs last week, only to become unnerved by a plunge in oil prices, softening macro data and rising uncertainty over future Fed policy. Weakness amongst tech majors, like Microsoft, Amazon and Alphabet, on valuation grounds was the principal feature while more defensive banking, utilities and other income-paying stocks found favour. Activity nevertheless remained subdued, as the S&P-500 and Dow Jones Industrial eventually closed all but unchanged while the Nasdaq was dragged down to finish off 0.29%. Continuing the recent run of softer economic data, new orders for US manufactured durable goods fell by more than expected in the month of May, tumbling twice as far as economists had predicted at -1.1% after having slumped by 0.9% in April. A plunge in demand for Transportation Equipment was apparently to blame, in the absence of which the figure would in fact have marginally edged up. Long-term US government bond yields closed at a new 2017 low yesterday as the latest sign of weak US business spending added to concerns over the economy's growth momentum, in the process generating demand for haven assets; the benchmark 10-year Treasury yield settled at 2.135%, down one basis point from Friday and its lowest close since 10th November. This morning's Asian trade continued the trend set overnight in the US. While the Nikkei benefitted from a US$ that firmed on hopes Fed Chair, Janet Yellen, will retain her recent hawkish stance when she speaks later today at London's Royal Academy, and the South Korean KOSPI brushed off weakness in US tech stocks to rise modestly, most of the other regional indices closed with small losses. The S&P/ASX 200 was pressurised by weakness amongst its large miners, like Rio Tinto (RIO.L) and BHP Billiton (BLT.L), while Chinese equities trading through both the Hang Seng and Shanghai Composite ran into profit taking. The major European markets all moved to the upside on Monday, after the Italian government agreed over the weekend to close two struggling lenders - Veneto Banca and Banca Popolare di Vicenza - after the European Central Bank declared on Friday evening that both faced imminent insolvency. The FTSE MIB accordingly topped the performance list, although the CAC-40 put on 0.56% and the Xetra Dax by 0.29% following stronger than expected IFO Business Climate numbers for June. Food giant, Nestlé S.A , was also a feature, rising 4.3% to an all-time closing high after billionaire activist investor Daniel Loeb's Third Point hedge fund has taken a $3.5 billion stake in the Swiss giant; spurred by the news, the Swiss SMI benchmark index rose by 0.98%. The UK's FTSE-100 index moved 0.3% higher to end at 7,446.80, boosted by its banks, consumer goods and oil companies. After talks at Downing Street with UK Prime Minister, DUP leader Arlene Foster said she was "delighted" an arrangement had been agreed; the prime minister stated the DUP and the Tories "share many values" and the agreement was "a very good one". The UK currency had, however, lost some ground earlier in the morning after data from the British Bankers' Association showed that UK mortgage approvals declined to an eight-month low in May; Sterling touched a low around USD1.2700 following the BBA data but ended at USD1.2728 at the close of the European session, hardly changed from USD1.2732 at the same time on Friday, following Theresa May's declaration . UK Macro data due for release today includes the Financial Stability Report, June CBI Distributive Trades Survey as well as a speech due from the BoE Governor, Mark Carney. The EU also has a speech due from the ECB President, Mario Draghi at 08:00hrs GMT, while the US contributes its weekly Redbook index, its April S&P/Case-Schiller Home Price Index, its API Weekly Crude Oil Stocks and its June Richmond Fed Manufacturing Index; Speeches are also scheduled from FOMC Members, Patrick Harker and Neel Kashkari, followed later by Janet Yellen. UK corporates due to release earnings or trading updates include Petrofac (PFC.L), Debenhams (DEB.L), Findel (FDL.L), Benchmark Holdings (BMK.L), IG Design Group (IGR.L), and Carpetright (CPR.L). Finding little inspiration from other global markets, Europe is likely to open in a lacklustre mood this morning, with London in particular looking to Mark Carney's 10:00hrs GMT speech to set the day's tone; in the meantime, the FTSE-100 appears set to remain somewhere between 5 and 10 points down." - Barry Gibb, Research Analyst

  • 27 Jun 17

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