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The degree of flexibility in respect of monetary policy and the perceived potential for tighter monetary policy as a result has seen the FTSE 100 drop lower for the third consecutive day. The prospect of a reduction in current easing from the FOMC is also weighing on the global markets.
European markets may once again be taking cues from Asia, after lower openings across the board greeted traders this morning following the 4% decline in the Nikkei stock average. Mainland European bourses have gone on to outperform the UK however, with the German DAX getting a helping hand from some superb factory order figures which jumped 3.8% in June against the 1% gain expected. The IMF revising up its growth forecasts for the European powerhouse has also kept a floor on the index.
Much of today’s sell off in TUI Travel can be put down to profit-taking in the wake of the new one-year highs established yesterday. The travel company announced an 18% rise in profit and appears reasonably certain that year-end targets can be met. The stock has spent the day in the red and posted a 5% loss on the day.
Randgold Resources' earnings were never expected to beat market expectations but the 62% fall in second-quarter profit as a result of slumping gold prices sent shares spiralling down by 6% in early trade. The stock has recovered some of the losses going into the close as investors focus on the fact that the company has not made any write-downs to date. The plan to cut costs in the next six months is also helping investors see a potential uplift for the share price from this point.
Old Mutual on the other hand pushed higher by 3.5% as operating profit for the first half of the year was in line with expectations. The firm reported an operating profit of £801 million and a cashflow of £9.1 billion, well ahead of market forecasts.
US markets opened lower for the third day as hawkish comments from US Federal Reserve officials ignited profit-taking and investor caution.
Clothing designer Ralph Lauren's update to shareholders today was met with a sell-off as first-quarter net income fell to $181 million, down from $193 million last year. Earnings per share just beat expectations at $1.94 per share, with sales up at $1.65 billion. The stock price had seen an increase of 14.5% in the past six weeks and has fallen over 5% today on profit-taking and in reaction to the cautious outlook from the company president.
Investors will see earnings from Groupon released after the closing bell. Analysts expect adjusted profit of $0.04 per share on $594 million in sales. The Dow is trading 70 points lower on the day at 15,447.
West Texas Intermediate oil continued to fall today, bringing the decline this week to 2.88%. A decline in crude inventories was expected and the EIA delivered on it. A drop of 1.3 million barrels was recorded last week. News that US oil production has risen to its highest level since December 1989 has also helped push the price down. A stronger dollar does not help either as fears of tapering continue to keep the markets on the back foot.
The pound had a volatile day, falling to $1.52 against the dollar before surging to a six-week high in short order and claiming the best performing G10 currency on the day. The Bank of England inflation report and the forward guidance that accompanied it may well have had the intention of sending sterling lower. Markets have clearly priced in a rate-hike well in advance of the scheduled early 2016 mark.