Market Comments

Although European equities have sold off today, the report card at the end of the first quarter still looks particularly impressive as the DAX has clearly come in top of the class.

UK markets

After such a bullish day’s trading yesterday, the end of the first quarter looks to be triggering a little bit of profit-taking. The Dow has only added 0.75% year to date while the FTSE, weighed down by struggling commodity companies, has only fared slightly better returning 3.2%. The standout, when based in euros, has been the DAX as it started the day up by roughly 22%, the strongest first quarter seen in almost two decades. When viewed within the context of its performance year to date, German equity traders will probably be only too happy to give a little back today.

Today’s Thomas Cook numbers, taken in isolation, are a little underwhelming as the company’s figures have only just managed to meet market expectations, which is not a performance the shares’ recent moves would have inferred. The company’s tie up with Chinese tourism firm Fosun International – who have already acquired a 5% stake in Thomas Cook with the promise of another 5% from the open market – has added a safety net below the price. Kingfisher has spent a second day in the headlines after yesterday confirming its withdrawal from acquiring French firm Mr Bricolage. Today the company has posted full-year profits down 7.5% but in line with market expectations. More importantly the decision to close 60 underperforming B&Q outlets is the sort of pro-active action investors like to see, and this helped drive the shares up by more than 3.5%.

US markets

The end of the quarter has seen the US equity markets perform in a fairly meek and mild manner in comparison to the recent past. The benefits of a weak euro and the safety net of the ongoing QE scheme have seen European equities put their US counterparts into the shade, as there was only ever going to be one winner in that beauty contest. As we once again move closer to the next US reporting season it appears more and more likely we will hear grumblings from the US corporate scene, as exporters have seen their goods become increasingly expensive in comparison to their global competition. For the first time since 2010 we have seen two months of contraction in the Chicago PMI figures, and this will have added to the cautionary prevalence of US equity traders.

Commodities

In tandem with the dollar strengthening, both crude and US light oil have been squeezed a little lower. In conjunction with the currency pressure, the ongoing talks surrounding Iran’s emergence from the sanctions wilderness has added another dimension to the imbalance of oil’s supply to demand. Last week’s intraday move above both the 50- and 100-day moving averages has seen gold suffer the same fate as Icarus, with the move alerting the gold bears to the precious metal’s efforts to move into overbought territory.

FX

The last twenty-four hours have seen the dominance of the dollar return to the currency markets, as EUR/USD spent the morning flirting with a break below the $1.0700 level and GBP/USD sunk as low as $1.4745. As ambiguous as Janet Yellen’s speech might have been last Friday, currency traders are in full agreement that the US still looks streets ahead in the race to start raising interest rates.