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Despite some relatively positive earnings releases, bears are winning the day with only Weir Group (+5%) standing out from the crowd, ironically with expectation beating but still with falling profits. It feels a little like déjà vu, as for the third day in a row we have a house builder reporting bumper profit-growth. Taylor Wimpey has reported profit growth of 39%, and its recent strategy has given the company the chance to return excess cash to shareholders. Much as per the other house builders, those who dipped their toes last year as the housing market started to heat up will be sitting pretty today, and a degree of profit-taking has moved the share price lower by 4.5% this morning.
We have also seen weakness in ITV (-4%), despite announcing a special dividend, Travis Perkins (-2.5%), despite the aforementioned housing recovery lending support to rising earnings, and Tesco (-3.7%) as a number of brokers highlight their relative indifference to yesterday’s investor day. The share price is relatively unchanged from ‘that’ profit warning two years ago, despite a roughly 17% gain in the FTSE since then.
UK GDP for the final quarter of 2013 has just crossed trading terminals for the second time round, with unrevised quarter-on-quarter growth of 0.7%. Other than positioning around the numbers, cable showed little interest, and this is something seen also in EUR/USD and some of the other pairs this week as major pair volatility has dropped off.
Focus in the FX space has started to shift a little towards events in China, where we look to see if credit conditions are tightening up in a similar way to last summer. USD/CNY has tracked higher for seven days in a row, and we are around 6.12 currently with moves towards 6.15 eyed.
Volatility here is picking up and should be watched, but nothing like some of the action seen in the commodities space this week. Natural gas in the US is down 20% this week alone, having been up over 50% year-to-date as the US winter thaws out and a combination of high stockpiles and expiring near-term contracts push traders towards the exit.
Ahead of today’s US open, we are seeing the S&P 500 making another push for the 1850 level having failed to hold it yesterday. The index is currently up just above 5 points at 1851.