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Today's Markets: MKS, TSCO dip on mild profit 'upgrades', European stocks slightly weaker

A slew of corporate earnings in the UK, and the latest update from world markets
Today's Markets: MKS, TSCO dip on mild profit 'upgrades', European stocks slightly weaker
  • FTSE 100 grows again
  • US CPI at a 40-year high
  • Earnings reports from Tesco and Marks & Spencer

Markets

European stocks were slightly weaker in early trade after yesterday’s rally. We had a solid session for the FTSE 100 on Wednesday, marking a new pandemic high at 7,565. This morning trading a little lighter but no signs of fright.  

US CPI came in at a 40-year high of 7 per cent but market reaction was muted as it was largely in line, albeit the core reading was a bit higher than expected. At first the absence of any upside surprise to the headline number left risk bid: NDX futures rose, the dollar declined. NDX turned lower after the first hour of trade to go lower, the dollar kept on falling, taking out the first 23.6 per cent Fib support at 95.20.  

In the end stocks rallied and the three major Wall Street indices ended higher, but the price action suggests ongoing uncertainty re the Fed and inflation. ARKK fell, megacap quality names lifted boats – Microsoft (MSFT) and Alphabet (GOOGL) +1 per cent. Tesla (TSLA) up almost 4 per cent – couple of PT upgrades in the last two days helping bulls feel good about themselves again. 

Whilst stocks managed to end the day higher, the dollar kept on falling. DXY here breaking key trend support, moving close to the 100-day line, where support could emerge at 94.60. US PPI inflation and unemployment claims are the main data points to watch today. Weakness in the dollar could continue for some time if markets are confident in the global recovery, but US inflation/Fed cloud the outlook.

EURUSD rallied and broke free from its narrow two-month range, taking a 1.14 handle. The shift in USD positioning seems clear but the Fed may yet surprise with a more aggressive cycle. The cross is just pausing in its advance at the 23.6 per cent retracement of the decline since the start of 2021.

Cable took at 1.37 handle, bulls still charging. 1.38 remains in focus. 

Fresh two-month highs for oil after a big drawdown in US inventories. WTI rose above $82, path to $85 remains open, though that’s maybe where it tops again and momentum fades. Prices a tad cooler this morning but $82 holds.

 

Neil Wilson is the Chief Market Analyst at markets.com