European markets boosted by earnings growth

Fiona Cincotta CityIndex

European markets are higher in the absence of fresh US tariff news as the current results season in Europe continues to show strong earnings. The FTSE also powered higher with the rare sight of only a handful of companies trading in the red, and the rest of the index constituents trading up. Diageo chalked up 1.62% after a ratings upgrade and the rest of the gainers were distributed evenly across various industries. Brent crude prices continued to slide, down 1%, in the wake of Libya’s decision to restart its oil exports.

The ‘special relationship’ or the especially difficult relationship?

US President Trump has put his counterpart Teresa May in a difficult position this morning saying that a soft Brexit would mean no trade deal between the UK and US. This comes a day after May released a white paper on the UK-Europe relationship after Brexit, offering a softer stance ahead of next week’s vote on a Brexit trade bill. The UK can’t afford to alienate either the US or the EU, its two largest foreign trade partners, and will not be able to choose an “either-or” solution. Trump’s comments come at a particularly bad time for May who is facing bigger problems as her government is in a precarious balance after the resignations of David Davis and Boris Johnson earlier this week. The pound dropped 0.6% against the dollar following Trump’s remarks.

Big banks to kick off US reporting season

JP Morgan, Citigroup and Wells Fargo, three of the biggest American banks, will start off the US reporting season in earnest, reporting their results later today. They are expected to show a repeat of the record gains they have made in the first quarter but the increase in share prices is likely to be tampered by the backdrop of rising international trade tensions and the first whiff of a possible recession. As the Federal Reserve has been increasing interest rates short term US Treasury yields have been steadily climbing, but long term yields have started to flatten or fall. This type of yield distribution usually indicates that there is a recession around the corner and if that is the case this could affect bank loan rates and demand.

Author

Fiona Cincotta

CityIndex

EUR/USD remains bid, focus stays on 1.1900

EUR/USD has broken its two-day run of losses and is ticking modestly higher on Thursday, hovering around the 1.1880 area as the US Dollar struggles to find clear direction. Weekly Initial Jobless Claims rose more than expected, taking a bit of shine off the Greenback, but markets are largely in wait-and-see mode ahead of Friday’s US CPI release.

GBP/USD sticks to the bid bias, still below 1.3700

GBP/USD is trading with decent gains around 1.3650 on Thursday. Indeed, Cable is attempting to shake off the weakness seen earlier in the week amid another choppy session for the Greenback, while a run of disappointing UK data has so far failed to derail the pair’s tentative recovery.

Gold recedes slightly, trades below $5,100

Gold remains stuck in choppy trade on Thursday, deflating marginally just below the $5,100 mark per troy ounce as the US Dollar drifts without a clear trend. Softer US Treasury yields across the curve are offering some support, but with markets treading carefully ahead of Friday’s US CPI release, conviction remains limited and price action continues to look hesitant.