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Breakfast Today

  • 28 Apr 17

US stocks largely trod water on Thursday, with advances in technology and pharma shares being offset by losses in the energy sector. Only the NASDAQ made a reasonable gain, achieving another record high having been boosted by pleasing results from a number of its tech-related issues. PayPal Holdings shares, for example, climbed 6.2% after the company reported strong first-quarter revenue and usage growth and said it plans to buy back as much as US$5 billion worth of its own stock. Comcast and Intuit also put in good gains while Bristol-Myers moved to the upside after results topped expectations. A continued sell-down of oil futures, however, took the wind out of the market's sails, with the S&P500 sector posting as much as a 1.9% loss while WTI Crude prices dropped 2.7% on continuing oversupply concerns. First-time claims for US unemployment benefits also unexpectedly increased in the week ended April 22nd, according to a report released by the Labor Department on Thursday, which will ensure that next Friday's scheduled release of the more closely watched monthly employment report for April will be very carefully scrutinised. Government bonds ticked marginally higher, with the yield on the 10-year US Treasury falling to below 2.3%, from 2.312% Wednesday. Sentiment during this morning's Asian trade was largely dominated by Trump's threat to pull the US out of the North American Free Trade Agreement and his continuing war of words with North Korea's Kim Jong-un, resulting is a fairly broad regional sell-off. The Nikkei led these despite a softer Yen, as traders wound down activity ahead of the Golden Week holiday. South Korea's benchmark Kospi, however, pared gains after having touched a fresh six-year high early in the session, as a result of comments from the US President that he might renegotiate or terminate a trade pact with the country, which he described as a 'horrible deal'. Investors also appeared to emerge somewhat perplexed from Mario Draghi, the ECB President's press conference on Thursday. Noting that the recovery was 'solid and broad', that EU PMI was now at its highest since 2011 and that deflation risk had 'virtually disappeared', his unwillingness to steer regarding future direction on future monetary policy, was considered something of a contradiction. This could possibly have been due to reluctance to move before second-round voting for the French Presidential Election completes, leading some to concluded that there was enough optimism to anticipate the beginning of material change with the June meeting. The net result, however, was for the STOXX Europe 600 to close rather in a deflated mood, although the FTSE-100 fell even more, partly due to its heavy weighting in Energy-related shares, partly because ex-dividends stripped points from the index, partly because a dovish ECB sparked Sterling higher and also because of the warning shot from Chancellor Angela Merkel suggesting that Britain must drop any "illusions" it has about negotiating on other issues before it settles its financial commitments to the EU. Tough Brexit negotiations could be coming back on the agenda. Meanwhile, there is quite a lot of UK macro data due for release today, including Nationwide House Prices, BBA Mortgage Approvals for March, Q1 GDP preliminaries and February's Index of Services. The EU also provides M3 Money Supply for March, together with April Consumer Prices, while the US offers its own Q1 GDP, its Employment Cost and Personal Consumption Expenditures Indexes, followed by the Chicago Purchasing Managers numbers and Baker Hughes US Rig Count. FOMC Member, Lael Brainard is also due to make a speech. UK corporates due to release earnings or trading updates include Barclays (BARC.L), RBS (RBS.L), Hastings Group (HSTG.L), EMIS Group (EMIS.L) and Rotork (ROR.L). London equities are seen opening modestly higher this morning, with the FTSE-100 up between 5 and 10 points in early trade despite the GfK Consumer Confidence survey released late yesterday indicating a slight softening during April.

Breakfast Today

  • 27 Apr 17

A firmer US opening, boosted by positive quarterlies from Twitter and Boeing, pushed the FTSE-100 back into positive territory yesterday afternoon where it stayed to the close. The STOXX Europe 600 moved similarly. London was helped by an impressive near doubling of Standard Chartered's (STAN.L) first-quarter profits as revenue rose and loan impairment declines along with an upgrade for Merlin Entertainment (MERL.L), although GKN (GKN.L) warned on its growth rate while the sell-off of miners continued after BHP Billiton (BLT.L) cut its guidance for coking coal and copper production yesterday. With Macron euphoria quickly fading, the Euro declined against the international basket, amid anticipation of the European Central Bank meeting today resulting in no change in key interest rates or its asset purchase program. This will be followed by President Draghi's regular post-meeting press conference, although he is unlikely to provide any signal on withdrawing stimulus support despite a pick-up in inflation. Meanwhile, expectation of Donald Trump providing more detail and timing for the "massive" cuts in corporate and personal taxes pledged during his presidential campaign initially at least, sent the NASDAQ to a fresh intraday record. By the close, however, the three principal US indices had all given up their gains, closing unchanged to fractionally down. The problem was that Trump's disclosures yesterday evening, outlining a slashing of the corporate tax rate to 15% from 35% along with major changes to the individual tax system, offered few specifics beyond what had already been leaked. This, in turn, fed scepticism among investors that Congress would be willing to pass such a major package, which has been estimated to cost as much as US$5.5tr over the next 10 years, without significant detail of exactly how the funding gap created might be closed. Confidence in the US$ further waned against the international basket after a White House official then suggested a draft executive to withdraw the US from Nafta is under consideration. Heightened concern that the President's office still appears focused on simple headline grabbing, rather than making detailed, strategic long-term planning, however, then turned attention back to North Korea and Secretary of State Rex Tillerson's launch of a new push combining diplomatic pressure and the threat of military action in a bid to halt the country's advancing nuclear-weapons program. Investors became increasingly unnerved by suggestions of the potential dangers for the US of failing to comprehend the psyche of the country's wild-child, Kim Jong-un. Asian equities dismissed such early fears, however, to recover from a broadly weaker opening to end mostly with modest gains, leaving only the Nikkei subject to profit taking on recent rises despite a weaker Yen and oil futures giving up some of the gains made on Wednesday following U.S. data suggesting refiners continued to eat into stored crude, drawing down stockpiles down by 3.6m barrels last week. Part of Thursday's uncertainty appears related to doubts over Russia's willingness to fully participate in OPEC's proposals to extend the existing production cap agreement. Macro data due from the UK today includes the CBI Distributive Trades Survey for March and April's Gfk Consumer Confidence index. The EU provides April Services Sentiment, Consumer and Industrial Confidence, followed by the ECB's Interest Rate Decision and Monetary Policy Statement. A large batch of data from the US includes Initial Jobless Claims, March Wholesale Inventories, Goods Trade Balance, Pending Home sales and Kansas Fed Manufacturing Activity. There is a long list of UK corporates due to report earnings or trading updates, including Lloyds Banking Group (LLOY.L), AstraZeneca (AZN.L), Taylor Wimpey (TW..L), WPP (WPP.L), Allied Minds (ALM.L), Travis Perkins (TPK.L), Howden Joinery (HWDN.L), Persimmon (PSN.L) and Weir Group (WEIR.L). Such a mixed bag of uncertainties and contradictions, is expected to generate a nervous mood for today's European open, with the FTSE-100 seen down 25 to 30 points in opening trade.

Breakfast Today

  • 26 Apr 17

"The health of corporate America ensured U.S. equities sustained their strong start on Tuesday. Impressive quarterly reports were delivered by a number of large-cap companies amid more general optimism, as investors await further details regarding the President’s planed tax cuts along with broad confidence that Macron will succeed in becoming France’s next President. The Nasdaq spiked up more than 0.7%, sending the index above 6,000 for this first time ever, while the Dow Jones rose more than 200 points, with results from Caterpillar driving the construction sector as Dupont and McDonald’s also pleased both at the top and bottom lines, leaving just Coca-Cola missing analyst’s best expectations. Banking, Biotech, Chemical, Computer Hardware and Networking Stocks all performed well. Economic releases, however, presented more of a mixed bag, with new home sales seeing a substantial increase in March contrasting a separate report from the Conference Board that showed a larger than expected pullback in consumer confidence for April, although the index still remains at a strong level. More than 190 S&P components are expected to have reported by the end of the week, with other big names scheduled to release quarterlies this afternoon including Boeing, PepsiCo, Procter & Gamble, Twitter, United Technologies. But against this background, Trump was forced yesterday to delay his push to secure federal funds to build his promised border wall with Mexico, in order to eliminate a sticking point as lawmakers work to avoid the looming government shutdown. Asian traders this morning also expressed relief that relieved that, other than staging a brief military drill as the USS Michigan nuclear submarine docked in Busan, no significant gestures were received from Pyongyang as North Korea’s 85th People’s Army Day drew to a close. This allowed the region to extend its gains for the third day, picking up a hint from positive US and European closes during early morning trade, with Japan putting in the strongest performance, although the ASX and Hang Seng were not far behind and, more modestly, the Shanghai Composite also reversed early losses to end in the positive. European stocks also closed higher yesterday as French manufacturing sentiment strengthened to a near six-year high in April, leading the Stoxx Europe 600 to rise 0.2% while recording its fifth consecutive session of gains. The FTSE-100 put almost as much on, as safe-haven assets, like Gold and Government Bonds, continued to retreat. There is no UK or EU macro data due today, although Theresa May hosts Jean-Claude Juncker and EU chief Brexit negotiator Michel Barnier in London. The US releases MBA Mortgage Applications and EIA Crude Stocks change numbers. UK corporates due to report earnings or trading updates include Antofagasta (ANTO.L), Fresnillo (FRES.L), CRH (CRH.L), Standard Chartered (STAN.L), The London Stock Exchange (LSE.L), GSK (GSK.L), (BOO.L) and Tullow Oil (TLW.L). Investors will also be keen to hear more from the EU’s foreign policy chief, Federica Mogherini, following reports that Brussells wishes to expand its dialogue with Russia on key foreign policy issues, the first significant sign of a thaw in relations and a move that seemingly reflects growing concerns regarding the U.S.’s unpredictable international policy. London equities are seen having trouble sustaining recent upward momentum, with mining giant BHP Billiton cutting its annual guidance for coking coal and copper this morning, the FTSE-100 to be down 10 or so points during opening trade. " - Barry Gibb, Research Analyst

Breakfast Today

  • 25 Apr 17

The outcome of the first round of the French Presidential Election provided tangible relief across all international equity markets yesterday. As far as traders are concerned, Macron is already the President-elect. A little dangerous perhaps, given the havoc that could still be wreaked should Le Pen manage to shock all on 7th May, but nobody is taking that story right now. Whether next Wednesday's live televised debate between the two contenders changes this remains to be seen but, for yesterday at least, Frexit and redomination fears dissipated, the Euro rocketed and the VIX volatility index dived, while equity gains were, not surprisingly, led strongly by European financials, which celebrated their continuing anticipation of a pro-growth, stimulus and non-protective environment. The excitement spilled over into a broadly-based rally across most sectors in both the STOXX Europe 600 and the FTSE-100, with the latter putting on its largest gain since September leaving only utilities like Centrica (CNA.L) and SSE (SSE.L) in London to retreat following weekend reports that the Conservative manifesto will include a cap on household energy bills. US equities mimicked this, with equities also moving sharply higher from the open with steel, tobacco, chemical and airline stocks are showing strong moves to the upside, along with most of the other major corporates. The rise in the three principle indices was further supported by reports from White House aides that the President has ordered an acceleration of efforts to finish drafting tax plan to cut the corporate rate to 15% (from the current 35%) and to prioritise this with a view to reducing the deficit. Treasuries meanwhile sold off, with the yield on the 10-year note rising as high as to 2.323%, from 2.234% on Friday, before settling at 2.275%. Given that today marks the 85th anniversary of the Korean People's Army, it is possible that a show of strength from Pyongyang, perhaps in the form of a nuclear detonation or a long-range missile test, could reawaken geopolitical tensions that have otherwise temporarily gone to the back of investor's minds. Concerns have been raised somewhat further by the US sending one of its submarines to join the armada that is already positioned on the Korean Peninsula. Asian stocks surprisingly ignored this to end higher for a second day, with closing gains similar to those seen in the US. Japan led the way once again, with the Nikkei up closing up over 1%, followed by with a similar move from the Hang Seng, with confidence boosted by the Shanghai Composite managing to finish in the positive after the Shanghai benchmark's 1.4% drop on Monday, its biggest hit in four months. Oil prices rebounded slightly during the Asian session, after weakness in New York sent futures to their lowest level since late March, although traders still insist that production and other signs of global oversupply will keep thwarting the widely-expected rally. The only UK macro data due this morning is the Public Sector Net Borrowing requirement for March and nothing is due from the EU. The US, however, provides a batch of statistics, including its Redbook Index, House Prices, New Home Sales, Consumer Confidence and the Richmond Fed Manufacturing number for April. UK corporates due to detail earnings or trading updates include AB Dynamics (ABDP.L), BHP Billiton (BLT.L), Carpetright (CRP.L), St. James Place (STJ.L), Whitbread (WTB.L), Circassia Pharmaceuticals (CIR.L), Amec Foster Wheeler (AMFW.L) and STV Group (STVG.L). A flood of quarterly earnings is also due from the US this afternoon. With equity party having continued overnight, London is expected to open firmer once again this morning, with the FTSE-100 seen up 15 to 20 points in early trading. Touch sensitive investors will, however, be keeping a wary eye on Kim Jong-un's military celebrations for any new signs of looming confrontation.


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