Europe
Eurozone stocks are driving higher as the dip in the euro has boosted equity benchmarks. The euro has sold off after the latest update from the European Central Bank (ECB), and the slide has helped the DAX and CAC 40, while the FTSE 100 is being dragged higher by the bullish move on the continent.
Barclays’ shares are in the red after the fine from the U.S. Department of Justice caused the bank to post a loss. Underlying first-half profits were £1.7 billion, which topped the £1.4 billion expected, but a fine of £1.7 billion from the DoJ and a £400 million provision for the mis-selling of PPI led the bank to register a loss. The size of the fine has eaten into the company’s reserves, and caused the strength of the balance sheet to slip. The common equity tier (CET1) slipped from 13.3% to 12.7%, and that has eroded some investor confidence. The share price has been in an upward trend since November, and if it holds above 200p, its outlook might stay positive.
Royal Dutch Shell (LON:RDSa) revealed a solid set of first-quarter figures, but profit-taking has sent the stock lower. Quarterly profits jumped by 42% - its best rise in over three years. Oil prices are at multi-year highs and production was upped too, which was the recipe for the stellar figures. On Tuesday, the share price traded above 2,600p – the same price it was when the oil market was above $100 per barrel in 2014. It would appear that investors were already bullish on the stock in the run-up to the figures today, and a lot of the good news was already priced in.
Deutsche Bank (DE:DBKGn) shares had a positive start to the session even though the bank delivered disappointing results, and now the stock has turned lower. The finance house has had a poor performance recently, and today it reported a 79% drop in first-quarter profit to €120 million, and that was well below the €376 million expected. Deutsche Bank stated it would continue to trim the size of the business and reduce its headcount in order to become leaner.
U.S.
The major U.S. indices are higher today after strong corporate earnings and economic indicators have boosted investor confidence. The geopolitical mood hasn’t really changed, but for now dealers are content to snap up stocks while the domestic news from the US is upbeat.
Jobless claims have fallen to 209,000 – the lowest number since 1969, and this will help set the tone for the U.S. non-farm payrolls report next week.
U.S. durable goods jumped by 2.6% in March, while economists were expecting an increase of 1.6%. Meanwhile the February report was revised to 3.5% from 3.1%. This all points to growing consumer demand.
Facebook (NASDAQ:FB) posted its first-quarter figures, and profit jumped by 63% while revenues rose by 49%, both comfortably topping estimates. The data scandal involving Cambridge Analytica occurred during the three-month period, and the true impact will show up in the next quarterly update. The stock gapped higher, and is currently trading around its 200-day moving average at $173.03. If it can hold above that metric, it could retest the $180 region.
FX
GBP/USD is being helped by the dip in the greenback. Yesterday, the US dollar index hit its highest level since January, and now we are seeing some profit being taken. The U.K. CBI realized sales index came in at -2 in April, which was an improvement on the March reading of -8, but economists were expecting a reading of 5. Sterling lost ground last week when Mark Carney, governor of the Bank of England, said a rate-hike next month wasn’t a done deal, but it remains in its upward trend.
EUR/USD pushed higher after Mario Draghi stated the ECB plans to wind down its stimulus package this year, and traders are speculating there could be a rate hike in the middle of 2019. The head of the ECB mentioned the slowdown in economic momentum in the eurozone, and this spoked some currency traders. As always, Draghi gave himself some wiggle room, but stating the monetary easing policy would stay in place if it was necessary. The positive run on the single currency didn’t last, and has turned lower on the day.
Commodities
Gold has been hit by the firmer U.S. dollar. The update from the ECB put pressure on the euro, and in turn drove the greenback higher. The metal has dropped to its lowest level in six weeks, and a break below $1,310 might pave the way for $1,300 to be tested.
WTI and Brent Crude oil look like they are going to test their recent 41-month highs. The energy market is edging up as traders are concerned that U.S. President Donald Trump could look to impose sanctions on Iran next month over its nuclear program.