European stocks to open higher on rebounding risk sentiment

Morning Note

Key European indices are set to open August positively as risk sentiment lightens after last week’s poor close for the markets.

The FTSE100 starts on the front foot, tracking over 70 points higher this morning. The DAX jumps up 112.27 points, while the CAC40 is up by 55.08.

It’s good to see the markets in a broadly confident mood this morning. Asian equities, which performed stolidly last week following a spate of new Chinese regulatory crackdowns, also begin August with strong positive movements. The Hong Kong Hang Seng, for instance, has taken big strides to reach 26,195 at the time of writing – up 270.

Elsewhere, a number of confident earnings reports from global large caps is helping power positive stock market sentiment.

HSBC, for example, reported at the start of Asian trading it had grown profits fourfold this quarter, reaching $5.1bn. Europe’s largest lender’s H1 profits are up 150% year-on-year, totalling $10.8bn. Total revenues, however, are down from $13.1bn in Q1 to $12.6bn. Even so, a very strong quarter for HSBC has been seen.

Rolls-Royce and Taylor-Wimpey are amongst the European firms reporting quarterly earnings today. On Wall Street, technology provider Arista Networks kicks off another busy earnings week later on, while Uber, scandal-rocked Activision Blizzard, GM, and Virgin Galactic all due to share quarterly figures later this week.

Check our US earnings season calendar for more information.

The USD continues its bearish form, with the Dollar Index dropping to the 92 level, after dipping below that. This is the greenback’s worse performance since May and hasn’t been helped by the Fed’s dovish stance on rate hikes.

The weaker dollar has been fairly good news GBP/USD, however. The pairing has climbed to fresh daily tops of 1.3925, helping reclaim territory that slide away on Friday. The pound has been supported by falling Delta variant COVID-19 case numbers in the UK, as well as the softer dollar.

UK PMI data is due this morning although the markets may be anticipating a slowdown in both services and manufacturing output. Labour shortages and higher input costs, similar to those in the US market, may have stymied July’s growth.

Crude oil, both WTI and Brent, drop away from gains made over the weekend. WTI futures are currently trading at around $73.11, while Brent is hovering around the $74.60 area.

Bitcoin has cleared $40,000 this morning, but it did so several times in the last week before falling away again and staying in the $39,000 range. The world’s most popular cryptocurrency has had a tough time sustaining incremental gains last month, so it’ll be interesting to watch BTC price action as August progresses.