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Wall Street Lacked Direction on Mixed Earnings and Oil Decline; UK Jobs Data in Focus

Wall Street ended the session mixed overnight, as investors brushed aside Trump’s meeting with Putin and focused on earnings. Whilst the Dow manged to close higher supported by a 33% uplift in profits at BoA, energy stocks dragged the S&P lower amid a 4.6% decline in the price of oil.

The mixed performance followed through to Asia and then onto European bourses which are eking out gains but lacking conviction for the open.

 

Oil claws back some lost ground

Oil plummeted across Monday’s session as rumours circulated that Saudi Arabia and the US were working to bring the price of oil down in light of the US sanctions on Iran. Whilst Brent was seen making tentative gains overnight, this pales in comparison to the 4.6% loss on Monday and 10% decline over the past week.

This is not the first time that Trump has tried to talk down the price of oil, but the timing this time was crucial. His comments came at a time when Saudi Arabia was also taking aggressive steps to keep prices lower and as politically troubled Libya announced that it can resume exporting oil after taking back its ports. Whilst oil is back on the front foot, overnight, with the midterm elections moving into sight this is unlikely to be the last time that Trump takes a swipe at the price of oil.

 

Netflix dives on missed subscriber forecasts

Netflix reported after the bell and whilst earnings beat analyst expectations revenue and particularly subscriber growth figures have devastated investors. Netflix could do no wrong over the past 12 months, rallying over 100%, producing impressive number after impressive number, so a strong quarter rather than a stellar one in Q2 was certainly being reflected in the share price. Netflix dived 14% in after-hours trading; Nasdaq futures were also off by some 0.7%.

 

UK jobs data to distract from Brexit chaos?

Brexit woes continue to keep the pound range bound, with too many uncertainties still unresolved regarding Brexit; deal or no deal and even over whether Theresa May will be able to cling onto power through the week. However, the UK economic calendar provides at least some distraction from Brexit concerns, this week, although it may not all be good news.

UK data out today is not expected to do much to support the downbeat pound, with the employment report forecast to paint a mixed picture of the labour market. Whilst UK unemployment is expected to remain constant at 4.2%, and 115k jobs are expected to have been created in the three months to May. Wage growth is expected to remain constant and earnings including bonuses is forecast to have slipped to 2.7% from 2.8% in April.

The immediate concern for the BoE will be wage growth, particularly given that inflation also continued to decline. These figures are hardly likely to encourage the BoE to vote to tighten monetary policy when it meets in two weeks’ time. With rate hike expectations sitting at around 70%, this probability could find it is under pressure and pull sterling towards $1.31, should wages surprise to the downside. On the other hand, should the data reinforce the central bank’s theory that the slowdown in the economy was just in the first quarter and that activity is picking up again in the second quarter, the pound could look to target the 50-day moving average at $1.3320.

 

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