Financial market research and analysis

European stocks pin hopes on Macron

Generally well-received large cap earnings led the way in European equities, where political risk was priced out further in the run-up to the French election. A confident display from market-favourite Emmanuel Macron in Wednesday evening’s French presidential debates makes the odds seemingly impassable for Marine Le Pen. Unconfirmed documents insinuating Macron has been involved in tax evasion have probably come too late in the day to make a difference.

Miner sell-off offsets earnings on FTSE

A sell-off in the mining sector mirroring some dramatic moves in industrial metal prices offset well-received results from HSBC and Royal Dutch Shell. HSBC’s smaller-than-forecast profit drop increased the odds of more stock buybacks in the near future. Investors were encouraged by a jump in FICC trading revenues and HSBCs global diversity proved an asset after a strong performance at its Asian division. Royal Dutch Shell shares popped after earnings but the slump in the price of oil took the edge off. The breakeven price of $70 per barrel to justify the purchase of BG Group looks a long way off right now. Next shares fell after it cut its profit outlook.

Wall Street openup on no shutdown

Stocks on Wall Street opened higher, extending gains after yesterday’s decision to keep interest rates on hold.  The spending bill passed by the House of Representatives last night is heading to the Senate today. If the bill passes again it avoids the uncertainty associated with a government shutdown. A vote on the repeal of Obamacare could induce some movement in US stocks, which have been pretty boring for the last week. The S&P has closed within 0.2% of where it opened for the past 6 sessions.

Sterling back in business

Signs the UK economy is not down-and-out just yet has renewed interest in the British pound. Data on Thursday showed activity in the services industry expanded significantly in April. A relatively hawkish FOMC and US jobless claims falling to the lowest since April 2000 saw the dollar strengthen against the yen and commodity currencies. The important addition to the Fed’s statement was where acknowledged slower first quarter growth and inflation but said both should be overlooked. Perhaps we’re finally reaching a stage where and it’s not such a data-dependent.

Metals look heavy

Trump-led US infrastructure spending being called into question and signs of a slowdown in China are hitting metal prices between the eyes. It’s really China at the centre of the problem. Data on Thursday showed a slowdown in China’s services sector. Specifically China is still cranking out a lot of steel but clamping down on speculation in the overheated property market. That spells more supply than demand and lower prices. Iron ore has sunk from $90 to $70 / tonne in a short space of time but the cost of production is estimated to be closer to $57, meaning price still has room to go on the downside before production slows.

Gold and crude sink together

Brent crude oil sunk below $50 per barrel to its lowest since the November OPEC meeting when the cartel agreed to cut production. It was a triple whammy for gold. There is minimal demand for a haven with Macron seen as a shoe-in for the French presidency, commodities are getting pounded and the dollar, in which gold is denominated, is gaining traction after the FOMC.

The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced. Losses can exceed deposits.