UK Markets
Rumours of a deal between Greece and its creditors cancelled out initial negativity permeating the FTSE this morning, as eurozone PMI readings threatened to extend the already sizeable losses seen across global indices yesterday. Inside mainland Europe, they were not so lucky, where Germany's backstop stopped the buck as manufacturing activity growth was indicated to have slowed considerably following what was a stellar start to 2015 so far. The widely perceived impending crisis that is Greece took another turn as a Greek government official stated that according to the current rate of progress, a deal would be done by the end of the month. Unfortunately, for anyone with a memory, this simply reinforces the trend of Greek positivity and disregard for the needs of their creditors, followed by negativity and worry from creditors who repeatedly get their demands rebuffed. Any bounce was short-lived and the focus returned to the fact that a deal was supposed to be reached by tomorrow's Eurogroup meeting, and bills are coming thick and fast for Greece.UK-based miners brought the headline UK index higher, with Anglo-American and Rio Tinto leading the way. William Hill suffered a 4% fall in its share price, following the announcement that profits were down by £16 million in Q1, representing a 19% drop. January saw the worst ever week for the firm, with successful clients managing to siphon £14 million worth of winnings away from the betting firm. In the latest move by a high street supermarket, Sainsbury's has announced that it is looking to cut 800 jobs as part of a £500 million cost-cutting plan to take effect over the next three years. The rise of low-cost competition in the form of Lidl and Morrisons has forced the big dogs to be creative, and so far that creativity has simply taken the form of job cuts.
US Markets
US indices are looking largely mixed as the negativity driven by eurozone fears, along with a raft of disappointing US economic announcements, has been erased by resurgent upside in the likes of the S&P, Dow Jones and NASDAQ. The ability of markets to disregard the release of disappointing unemployment claims, manufacturing PMI and new home sales shows that for the time being, markets are being driven by geopolitical factors and sentiment. The consolidation seen within the Dow and S&P500 says a lot about the current state of the markets, with very little progress being made and indecision dominating affairs. While the US economy has largely enjoyed a stellar start to the year, it feels that eurozone indecision coupled with a strengthening dollar has tempered positivity somewhat. Given the impact the strong dollar is having on global sales for companies, we are returning to the cost-cutting measures of old to provide profits and that is not the kind of growth we want to see firms announce.A whole raft of company earnings have hit the markets today, with Caterpillar, General Motors, AbbVie and Proctor & Gamble all announcing pre-US open. GM's mooted share buyback highlights a common theme seen within markets, with easy credit and falling energy costs leading to a glut of excess cash on reserve. Heightened M&A activity, share buybacks and alike give us clues that firms are looking for a means to develop and typically have been coming up with fairly unproductive measures which are largely aimed at raising their share prices. Despite this, today saw GM boost sales and raise profits, so for now it seems it is performing well on both fronts. Caterpillar announced profits of $1.86 per share, representing a premium of $1.35 over market estimates. This comes despite a strengthening dollar and falling demand for its oil-related business.
Commodities
Both WTI and Brent crude are heading higher today, giving hope for many that we are seeing the signs that the lows seen back in January may really be the bottom for oil prices. US oil production is certainly on the decline and as supply finally begins to come off, the price is likely to hold up. However, the test comes when prices return to economically viable levels for some producers, as this reduction of investment is likely to be short term and the US oil boom isn’t going anywhere anytime soon.FX
The dollar appears to be losing ground against some of the major global economies, with EUR/USD and GBP/USD both breaking higher today. There are some warning signs that the dollar strength could be somewhat overdone, yet for the time being it is likely that we are simply within a temporary correction and dollar dominance will reign once more in the near future.
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