European stocks trade mixed, commodity stocks aid the FTSE

European stocks trade mixed, commodity stocks aid the FTSE

European stocks are trading in a mixed fashion on the final day of the week. The upbeat mood on Wall Street, which sent the S&P500 to record highs, failed to inspire fresh highs in Europe. Instead, concerns over travel dominated.

The UK government widened its greenlist – the countries that British tourists can fly to without having to quarantine on their return. However, concerns are growing that the changes to the list were still too restrictive to revive the key summer holiday period, leaving travel stocks out of favour. Meanwhile in Europe, German Chancellor Merkel, along with French President Macron are backing further travel curbs in order to prevent the delta variant from spreading. Travel stocks across Europe remain under pressure.

The FTSE is outperforming its European peers, thanks to a boost from energy and mining stocks overshadowing weakness in travel stocks. Higher commodity prices combined with a dovish BoE policy are making the UK market an attractive place to invest.

The Bank of England was upbeat on its outlook for the UK economy, but in line with the Fed, the BoE considers that the spike in inflation will be transitory. Let’s not forget that Covid cases are on the rise and the furlough scheme will come to an end in autumn – the UK is by no means out of the woods yet. The BoE remains in wait-and-see mood with the accommodative policy-keeping stocks underpinned.

Looking ahead to the US open, US stocks are pointing to a positive finish to the week after Biden’s USD600billion infrastructure deal was agreed, paving the way for investment in roads, bridges and broadband. The deal was less ambitious than what Biden had hoped for and that could explain treasury yields and the US dollar have remained downbeat this week despite the Fed’s more hawkish stance.

All eyes will now be on PCE data which will almost certainly support the Fed’s hawkish shift. Equities markets are trading quietly ahead of the release.


FX – Euro gains on upbeat German sentiment, USD edges lower ahead of PCE

In the currency markets, the euro is showing some signs of life, extending gains versus the US dollar for a second straight session. Data revealed that German consumer confidence is set to jump in July. The closely-watched GfK data rose to -3, up from -7 in June and ahead of forecasts of -4. As Covid cases recede and the economy reopens, optimism is running high which bodes well for a solid start to Q3.

The US dollar trades on the back foot after Biden’s infrastructure deal boosted risk sentiment, hitting the greenback’s safe-haven appeal. However, caution remains ahead of key inflation data. The PCE data will provide further clues as to how much pressure the Fed is under to start tightening policy sooner.


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Sophie Griffiths
Sophie Griffiths is a market analyst with OANDA, focusing on the UK and Europe. With almost 15 years of experience, she brings with her a deep-seated understanding of the financial markets, providing timely and relevant fundamental analysis across a broad range of asset classes.
Sophie Griffiths

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