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Markets appear to be taking their cue from Japan, where the Nikkei is back on strong form thanks to some encouraging comments from the country's central bank.
Weak CPI brushed off
Once again the FTSE 100 has been the leading light as far as European indices are concerned. The surprisingly weak CPI reading, which came in at 1.9% (below the Bank of England’s 2% target), has been brushed off. Markets are choosing to ignore any suggestion of a weakening in price growth and instead rejoicing in the fact that the UK appears to be enjoying a particularly beneficent combination of reasonable growth and lower price pressures. Such situations don’t come along too often, although no one would say the economy is out of the woods yet.
Across the Channel, Europe looks less buoyant. The German ZEW indicator was well below target, while Dutch finance minister Jeroen Dijsselbloem is enjoying an unwelcome return to form, dismissing any suggestion of debt talks for Greece before the summer as nonsense. It’s comforting to see that the eurozone is continuing with its ‘wait and see’ policy – after all, it has kept the show on the road for more than four years, so the mandarins probably see little need to tinker with it now.
InterContinental Hotels has been knocked back today, after yesterday’s pre-results rally carried the shares higher. Enthusiasm around the figures was decidedly mixed, and it seems that China may be a growing headache for the company, as revenue-per-room in the region grew by only 1% compared to a rise of 3.8% for the company as a whole.
Coca-Cola loses its fizz
The tail-end of the US reporting season still has one or two big names yet to report, and today’s figures from Coca-Cola released before the US open have not been particularly impressive. The fizz looks to have gone out of the company's results, as North American sales have fallen by 1% and revenues by over 3%. Soft drink manufacturers continue to battle the shift in habits towards healthier drinks; as a result, the forward-earnings figure of 17 for both Coca-Cola and its rival PepsiCo now look rather frothy.
This afternoon’s housing stats and the Empire State manufacturing figures have contributed to the soft start to US trading today, with the latter being particularly grim. Given the prevailing weather conditions on the eastern seaboard however, it is not exactly surprising.
Arabica coffee jumps 5%
Recent price action for Arabica coffee, which accounts for around 80% of coffee consumed around the globe, will have those addicted to the caffeine drink running for the hills, given the squeeze in the price that has exceeded 5% today. Particularly thin rainfall figures in Brazil, the largest grower of the commodity, have seen spot prises shoot up 25% this month alone.
Meanwhile, gold’s seven-day run of positive closes looks to be coming to an end, as the heady heights above $1320 look to be testing the bulls’ resolve.
EUR/USD reaches for new heights
EUR/USD may be surging towards a high for the year, and for the moment the short-term trend has moved into alignment with the longer-term one. The lows of July 2013 are now but a distant memory, and certainly the overall picture looks far better for the currency union than even a few months ago. However it’s hard not to feel that sentiment might get a bit more edgy as we head towards the highs just above $1.3800 that we saw a number of times in the final months of 2013. Today’s ZEW figures don’t help that number, but now the focus shifts to Thursday’s PMI figures which will give us a more thorough picture regarding the situation across Europe.