Financial market research and analysis

Markets returned from May Day (Labour Day) holidays in positive spirit. Investors were buying up stocks while discarding bonds and havens including gold. Currency markets were relatively quiet on the first day of the two-day Federal Reserve meeting. Multiple European equity benchmarks are less than a percentage point from multi-year highs. Event-risk like Wednesday’s US interest rate decision and the final round of French elections at the weekend may just need to pass to make room for the next leg higher.

BP earnings help FTSE

Energy company shares led the FTSE 100 higher after BP beat on the top and bottom line, nearly tripling year-over-year profits. Gains in the sector were capped by an afternoon sell-off in crude oil ahead of API inventories data. Disappointing manufacturing data meant mining companies were some of the biggest fallers.

Ocado - M&S partnership

Talk of possible tie-up between online grocer Ocado and clothing retailer Marks & Spencer had Ocado shares flying off the shelves. It would be an indirect admission from M&S that its future lies with food and not clothing.

Apple earnings speculation

Stocks in the US opened tentatively higher. First quarter results from Apple could be key for whether the Nasdaq can keep up its run of good form. Optimism for earnings growth from the FANG stocks is leading the market higher, even as the US government teeters on a shutdown. Trump said on Tuesday the government maybe needs a “good shutdown”. 2% of stocks on the Nasdaq exchange hit 52-week lows on Monday when the Nasdaq Composite index closed at a record high. That’s a sign the big tech giants are covering up some broader weakness.

EURGBP Juncker trade fades

The pound gained against the euro on Tuesday after UK manufacturing data leaped ahead of expectations while the Eurozone equivalent underwhelmed. The euro unwound most of its gains from Monday following a reportedly testy meeting between PM Theresa May and President of the European Commission Jean-Claude Juncker. One of the best ‘Brexit negotiation’ trades in FX markets is EUR/GBP. Gains in the pound against the euro says markets are concluding a rift with the unelected and generally disliked Juncker probably helps May’s election prospects.

Another oil rebound stalls

A pattern is emerging in oil markets where early optimism that OPEC can extend output cuts is used an afternoon sell the bounce opportunity. While US inventories continue to grow, market impatience with OPEC grows. BP’s Bob Dudley announcing one of the seven new upstream projects this year was a reminder that Big Oil will be adding more to the supply glut this year.

Havens lose ground despite Le Pen

After holding for a week gold has given up $1260 per oz in a sign markets are moving away from haven trades. The sense is that the French election is a done deal and that’s helped the VIX (volatility index) hit its lowest in a decade. The writing was on the wall when gold couldn’t rally on Friday’s soft US growth data. There was some buying ahead of $1250 per oz on Tuesday. The situation in North Korea seems like it could escalate anytime so these dips in gold could be an opportunity.