European spread trading markets have traded in a fairly benign fashion today albeit with a slightly softer tone, as German and UK budgets play out in Europe.
Even US existing home sales weren’t enough to lift markets out of the doldrums. The introduction of tax relief on North Sea oil would have expected to give a bit of a boost to oil producers, but no such luck there.
Retailers have been rather more buoyant on the back of some positive Q4 results from Sainsbury’s, though they could have been helped by the announcement to relax Sunday trading rules for 8 weeks during the Olympics.
Other retail bellwethers were also performing well with Marks and Spencer and Morrisons also higher.
The best performing sector has been defensive telecoms with Vodafone helped by a broker upgrade from Goldman Sachs, as well as a positive court ruling from India in a long running tax case.
Gold and silver miners Fresnillo and Randgold Resources are the better performers at the top of the leader board, helped by slightly firmer metals prices.
Banking stocks have slid back as the Chancellor announced an increase in the bank levy to 0.105%, while Aviva and Standard Life are also down after going ex-dividend.
US markets opened slightly higher this morning in the absence of any real direction in European markets though they have drifted into negative territory with the banks helping the slide.
Upside momentum has been somewhat tempered by disappointing existing home sales for February which slid back 0.9%, below expectations of a 0.9% gain. Unsold inventories remain at fairly elevated levels.
With the UK budget taking centre stage today this morning’s February public finance numbers were an early blow to a chancellor who was hoping that tax receipts would hold up into year end.
That proved to be a forlorn hope as spending climbed to push borrowing to a February record of £15bn. This miss suggests that any leeway the Chancellor may have made with respect to this year’s borrowing target has now gone.
Some good news was the lifting of this year’s growth projection by 0.1% to 0.8% but this was well telegraphed beforehand.
The Bank of England minutes didn’t really throw up too many surprises though the news that Posen and Miles favoured more QE did knock the pound off its early highs.
The reaction of the FX spread trading markets has been quite benign with the gilt market slightly higher and yields lower, while the pound is broadly unchanged, if a little weaker against the dollar. It was more affected by the disappointing borrowing numbers than by anything the Chancellor said.
The best performing currency has been the US dollar, after spending most of the day mixed it has started to gain ground in the afternoon session after the disappointing housing data.
The Australian and New Zealand dollar are both lower, still weighed down by a slightly softer commodities sector.
The single currency, like the pound had been pretty much side-lined for most of the day shrugging off concerns about rising Spanish bond yields, however, it started to slip back later in the day, after once again failing at the 1.3290 level.
The gold spread trading market is slightly firmer on the back of a slightly weaker US dollar and somewhat disappointing US housing data.
Vague talk of central bank buying interest at these lower levels has also helped support prices.
Oil prices appear to be going nowhere on the one hand supported by concerns about the Middle East, but weighed down by fears that by going higher they could choke off economic growth.
Saudi Arabian assurances that they could raise output by 25% if needed to meet any supply shortfalls, has done nothing to depress prices.
Copper prices have traded sideways ahead of some manufacturing PMI data out later this week.
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By Micheal Hewson, Analyst, CMC Markets.
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The material is not a personal recommendation and you should seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks if you are at all unsure, as well as confirming the legal, tax and accounting characteristics and consequences of any transaction.
