European markets dip despite Dow bounce
Over in the US the Dow Jones Industrial Average may be hitting new heights, but European markets are not in the same buoyant mood. In the UK the FTSE 100 has fallen back, not helped by disappointing results from Standard Chartered and Rio Tinto. European shares continued to slip on the strength of the euro, itself partly due to the weak dollar which has helped push up the Dow. The final scores in Europe showed:
- The FTSE 100 finished down 12.23 points or 0.16% at 7411.43
- Germany’s Dax dropped 0.57% to 12,181.48
- France’s Cac closed down 0.39% 5107.25
- Italy’s FTSE MIB fell 0.18% to 21,573.61
- Spain’s Ibex ended down 0.69% at 10,513.9
- But in Greece, the Athens market added 1.01% to 826.02
On Wall Street the Dow - having hit a new peak of 22,036.10 - is currently up 0.1% at 21,986.
On that note, it’s time to close for the evening. Thanks for all your comments, and we’ll be back tomorrow
Bob Doll, chief equity strategist at Nuveen Asset Management, told Bloomberg TV:
Hopefully 22 becomes a floor rather than a ceiling....there is cash on the sidelines, returns on that are low, bonds are sitting there doing not much, and earnings are coming through. So stocks are the story.
The Dow broke 22,000 for the first time ever, surging at the market openhttps://t.co/s1DKdwd7qL pic.twitter.com/sCVmklX5BM
— Bloomberg TV (@BloombergTV) August 2, 2017
US crude stocks fall by less than expected
Oil prices are sliding after new figures showed that US crude stocks fell by less than expected last week.
According to the Energy Information Administration, crude stockpiles dropped by 1.53m barrels to 481.89, lower than the 2.96m decline expected by analysts. But gasoline stocks fell by a higher than forecast 2.52m barrels.
The figures suggested a drop in demand even as oil producers continue to try and limit demand. Next week Opec and non-Opec producers are due to meet to discuss supply issues, with the background of US shale producers continuing to ramp up to make up for any shortfalls.
The latest EIA figure saw Brent crude, which was up 0.27% at $51.92 a barrel just ahead of the announcement, slip 0.7% to $51.42.
Back with the Dow, and here are the biggest movers so far (and the Apple effect is evident):
Updated
And here’s another thing which may knock markets back.
According to a professor at the Schulich School of Business, the first total solar eclipse in 38 years, set for August 21, could be a bad day for stock markets.
Professor Mark Kamstra said research showed that weather-related psychological states, such as seasonal affective disorder (SAD), could cause heightened risk aversion by investors. The study found that stock market returns in countries around the world are “significantly related to the amount of daylight through the fall and winter.”
So basically the solar eclipse could have a similar effect. Kamstra said: “Historically, solar eclipses have inspired great fear, and, even today, some superstition remains for many people, so the markets can expect some fallout,”
You have been warned.
The rally may not last, however. Neil Wilson, chief market analyst at ETX Capital, said:
It’s not the fastest 1,000 point run – it’s taken a lot longer than the 24 sessions it took to get from 20k to 21k – but it’s indicative of a bull market speeding to a top. The Dow is now up more than 11% this year, while the tech-heavy Nasdaq is up more than 18%. But August is usually not a great month for stocks – up 5 times in the last 20 - so there is caution about how long this can be sustained beyond earnings season euphoria.
And he added:
It’s not just Apple - earnings are delivering across the board for US equities. Whatever is happening in Washington is not bothering the stock market. It is hitting the dollar of course. A lack of any fundamental moves in bond spreads suggests the recent dollar swoon is largely politically-driven. A weaker buck is good for US stocks and increasing doubts about the Fed’s capacity to raise rates quickly is also supporting equities. The punch bowl is still half full.
The Dow has been hitting new highs despite the turmoil in Washington, with President Trump unable to enact his healthcare reforms while facing continuing questions over Russian involvement in the election, not to mention the shock departures of several of his key staff.
It is recent positive set of company results which has taken investors’ minds off the Trump turmoil, with Apple shares providing the final flourish with an opening 5% rise to a record $159 after its figures.
A weaker dollar - thanks to the growing likelihood the Federal Reserve may not raise interest rates again in the near future - is also helping lift shares in exporters. Naeem Aslam, chief market analyst at Think Markets UK, said:
Investors are completely immune to all the drama which is taking place over in Washington because if you look at the performance of the Dow, it appears everything is hunky dory. Although one can never underestimate the possibility of the president getting impeached but again that could mean more favourable trade relations with other countries and things moving back to normal. Thus, the impeachment trade itself could be positive for the equity market after a knee jerk reaction as the Trump trade would unwind.
In earnings, it is all about Apple. The firm comfortably topped its forecast and produced stellar numbers for its revenue and profit. The big news was about the production of iPhone 8, the flagship product for the firm will hit the market on time with no issues around production.
Dow breaks through 22,000 for the first time
The Dow Jones Industrial Average has broken through the 22,000 barrier for the first time, boosted by a host of positive corporate earnings reports, the latest being Apple.
If the Dow does hit 22,000 for the first time today, Apple won’t be the only one taking the credit...
Stock Market could hit all-time high (again) 22,000 today. Was 18,000 only 6 months ago on Election Day. Mainstream media seldom mentions!
— Donald J. Trump (@realDonaldTrump) August 1, 2017
US jobs weaker than expected in July
The ADP employment report is out and has come in below forecasts. Private sector employment increased by 178,000 in July, weaker than the 185,000 predicted by economists.
However, the number for June was revised up sharply to show a 191,000 increase in jobs, compared with an earlier estimate of 158,000.
The services industry accounted for the vast majority of new jobs in July:
Traders at spread betting firm IG are predicting the Dow Jones will open just shy of the 22,000 mark when Wall Street opens:
US Opening Calls:#DOW 21996 +0.17%#SPX 2476 +0.02%#NASDAQ 5930 +0.61%#IGOpeningCall
— IGSquawk (@IGSquawk) August 2, 2017
Time for a market update.
Major markets across Europe are in the red, with the FTSE 100 extending losses, and now down 29 points at 7,395.
- FTSE 100: -0.4% at 7,395
- Germany’s DAX: -0.3% at 12,213
- France’s CAC: -0.1% at 5,121
- Italy’s FTSE MIB: -0.2% at 21,580
- Spain’s IBEX: -0.5% at 10,534
- Europe’s STOXX 600: -0.2% at 379
Investors await the bell in Wall Street, where the Dow could surpass 22,000 for the first time.
Investors are braced for the latest decision on interest rates from the Bank of England’s Monetary Policy Committee, which will be delivered at noon tomorrow.
Although markets have brought forward expectations for the timing of the first rate hike since July 2007, economists polled by Reuters don’t think tomorrow will be the day.
They are forecasting another split among MPC members - after a shock 5-3 split in June.
This month two members of the committee are expected to vote for a rise in rates - to 0.5% from a current record low of 0.25% - while six are expected to vote in favour of no change.
Updated
Pound nears 11-month high
The pound is holding on to earlier gains against the dollar, up 0.3% at $1.3234, helped by a broadly weaker dollar.
Sterling is now at a near 11-month high:
Eduardo Gorab, property economist at Capital Economics, says the July construction PMI was “underwhelming”.
Here is the data in chart form:
Experts react: Brexit uncertainty weighs on UK construction
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, says the weaker than expected construction PMI shows Brexit uncertainty is weighing on commercial building:
The sharp fall in the construction PMI in July suggests that the renewed slowdown recorded by the official data in the second quarter won’t be short-lived.
The decline in the PMI primarily reflected a big drop in the commercial activity index to its lowest level since immediately after the EU referendum. Commercial clients reportedly delayed decisions due to worries about the economic outlook and elevated political uncertainty.
The adverse impact of Brexit uncertainty on commercial work likely will grow if, as we expect, exit talks progress slowly. Indeed, more firms will activate Brexit contingency plans as the Article 50 deadline draws closer, freeing up office space and sapping demand for new commercial projects.
Howard Archer, chief economic advisor to the EY Item Club:
Weakened economy activity, a lacklustre housing market and appreciable economic and political uncertainties threaten to be a damaging combination for the construction sector over the coming months. Meanwhile, construction companies are currently still being squeezed by elevated input costs.
House building activity could be pressurised by extended slow housing market activity and subdued prices amid weakened consumer fundamentals.
There is a risk that some companies may also be cautious about committing to major projects if there is any increase in level of uncertainty over the coming months.
Commercial building and housing weigh on UK construction
The detail of the July construction PMI survey shows reveals a sharp slowdown in commercial building such as offices as shops.
Activity in that part of the sector actually fell. Growth in housebuilding meanwhile slowed, doing to little to raise hopes that Britain’s housing shortage will be solved any time soon.
The strongest area was civil engineering, where growth actually accelerated in July.
The message from firms to appear one of waning confidence among clients, who were unwilling to commit to major spending decisions last month.
Mike Chappell, managing director for construction at Lloyds commercial banking, is hoping July was a blip for the sector rather than the beginning of a broader trend.
It has been a mixed month for the sector, so this dip in the reading is not a major surprise. The hope is that it is a blip rather than the beginning of a downward trend.
Results from commercial contractors show margins are holding up reasonably well and improving. Meanwhile, any nervousness about pipelines has eased for many firms by the awarding of contracts for HS2.
The principal headwinds – particularly input price inflation and concerns about the future supply of EU labour – remain, so the focus is on organic growth, continuing to boost margins to above the 2% mark and a disciplined approach to contract bidding. These priorities are still key if the industry is to mitigate the risks in the current trading environment.
Breaking: UK construction grows at weakest rate in 11 months
The Markit/CIPS construction PMI has come in a lot weaker than expected.
The headline index combining output, orders and employment in the sector fell to 51.9 in July, from 54.8 in June. Anything above 50 signals growth.
Economists polled by Reuters predicted a much smaller dip in the headline number to 54.5.
Tim Moore from IHS Markit:
July data reveals a growth slowdown in the UK construction sector, mainly driven by lower volumes of commercial development and a loss of momentum for house building.
Worries about the economic outlook and heightened political uncertainty were key factors contributing to subdued demand. Construction firms reported that clients were more reluctant to spend and had opted to take longer in committing to new projects.
More soon.
Updated
Dollar weakens as White House drama continues
The dollar is under further pressure this morning, as political drama in the US continues to unfold.
The dollar’s loss is the pound’s gain, with sterling nearing an 11-month high.
The pound is up 0.3% against the US currency, at $1.3234, and the euro is also up 0.3% against the dollar at $1.1839.
Dollar continues post Scaramucci declines - World First Morning Update August 2nd - https://t.co/pg24yizslj pic.twitter.com/Ab1ktxh2G7
— World First (@World_First) August 2, 2017
Apple shares hit a new high on iPhone sales
Apple shares hit a fresh record hight on Tuesday after the US tech giant announced it had sold 41m iPhones in the last three months.
Investors were also reassured as Apple suggested rumours of a delay to the launch of the iPhone 8, due in September, were incorrect.
Read our full story here:
FTSE dragged down by commodity stocks
The FTSE 100 is off 19 points this morning, with commodity stocks dominating the list of the biggest fallers:
Commodity shares are down on lower oil prices, with the Brent crude down 1% this morning at $51.29 a barrel. Rising US stocks of oil added to concerns about oversupply, pushing prices down.
Figures from the American Petroleum Institute showed that US crude stocks rose by 1.8m barrels to 488.8m in the week ending 28 July.
European markets fail to get Apple boost
Markets in Europe are mixed this morning. Shares have failed to get any major boost from the Apple-led tech rally that drove Wall Street higher on Tuesday.
The scores so far in Europe:
- FTSE 100: -0.3% at 7,405
- Germany’s DAX: +0.1% at 12,266
- France’s CAC: -0.3% at 5,113
- Italy’s FTSE MIB: +0.1% at 21,624
- Spain’s IBEX: -0.1% at 10,577
- Europe’s STOXX 600: -0.1% at 380
The agenda: UK economy to rebound in 2018, NIESR predicts
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
We have some upbeat predictions for the UK economy this morning, as the National Institute of Economic and Social Research publishes its latest set of forecasts.
Economists at the thinktank predict growth will accelerate to 1.9% in 2018 from 1.7% this year. They believe the fall in the value of the pound since the Brexit vote will give that long-awaited boost to exports.
As a result of stronger growth, NIESR says policymakers at the Bank of England will be ready to vote for a rise in interest rates in the spring. Previously they predicted the first rate hike would come after the second quarter of 2019, when Britain had left the European Union.
Jagjit Chadha, the institute’s director, says rate rises from the current all-time low of 0.25% will be a slow process:
We are not talking about a rapid return to higher interest rates, but signalling that process – even if it takes five to seven years – will help banks rebuild their balance sheets and create a healthier financial system.
Here is our story on the NIESR forecasts:
- Also today we have the latest healthcheck on the UK construction sector at 9.30 with the publication of the latest PMI survey. It is expected to show a slight dip in growth in the sector in July.
- At 13.15 the ADP employment survey for July will provide the latest insight into the US jobs market.
Updated
