- The S&P 500 closed fractionally lower yesterday, broadly holding Friday’s record highs. Basic Materials stocks were the primary outperformer for the session, buoyed by strong gains in metal prices following upbeat Q2 Chinese GDP growth figures.
- The dollar traded marginally lower against the euro, extending recent weakness post the disappointing inflation data. It was also a muted session for government bonds, with the yield on the 10-year Treasury trading 1bps lower.
- Oil prices settled 1% weaker, giving back some of the commodity’s strong 5.2% gain last week. Gold prices benefitted from further weakness in the dollar, rising 0.5%.
- Futures indicate a marginally soft open to the US trade later today on signs that the healthcare reform bill is effectively dead in its current form, casting a cloud on President Trump’s broader economic reform agenda.
- European equity markets broadly finished lower yesterday, as the Euro Stoxx 50 index fell 0.3%. However, strong gains for Mining stocks helped boost the UK’s FTSE 100 index, which settled 0.3% higher.
- There was little surprise from the final June consumer inflation price index data yesterday, with headline inflation confirmed at 1.3% yoy. June inflation data is due out of the UK today, where market expectations are for headline inflation are at 2.6% yoy.
- Asian stocks broadly traded lower overnight. Japanese equities fell 0.6% as Yen benefited from the risk-off mood and further dollar weakness.
Q2 slowdown contrasts with Q1 strength
Q2 results released yesterday for Atlas Copco, leading Swedish industrial (leader in industrial tools and compressor technology), highlighted strong, but weaker-than-expected, growth in sales (+18% yoy vs +22% expected) and adjusted operating profits (+30% yoy vs +34% expected). Market expectations had risen after a very strong Q1, but Q2 results highlighted a surprising lack of improvement in pricing power for the company in the period. Consensus earnings forecasts are likely to be revised down by low single digit percentages. Following yesterday’s almost 7% drop in the share price, Atlas Copco, held in the Goodbody Global Leaders fund, has risen 12% in 2017.