European markets nervous ahead of major data releases, miners up on iron ore price rally, BP upbeat and HSBC sells Argentina arm

“European markets showed signs of nervousness ahead of the European Central Bank’s interest rate decision later this week,” says Russ Mould, Investment Director at AJ Bell.

“Forecasts imply the ECB will hold rates at 4.5% yet last week’s stronger than expected US jobs data and the ongoing strength in the oil price have raised expectations that the Federal Reserve will push back rate cuts until later in the year, and this has subsequently spooked investors into thinking other central banks including the ECB will also sit on their hands for now.

“Tomorrow’s CPI inflation figure in the US also threatens to intensify the argument that rate cuts will not be imminent. The consensus forecast is for a 3.4% year-on-year inflation rate in March, up from 3.2% in February and 3.1% in January. Inflation slowly creeping higher goes against what the Fed wants to see to justify rate cuts.

“The FTSE 100 was flat at 7,942 as consumer goods companies including Unilever and Reckitt acted as a drag on the index, offsetting gains from the mining sector. Mining stocks have benefitted from rising iron ore prices amid speculation that demand will improve from Chinese steelmakers. The Chinese government is eager to stimulate the economy and there is a hope that its initiatives will feed through into greater steel activity, with iron ore a key raw material.”

BP

“Shares in BP hit their highest level in six months after it said first quarter upstream production would be higher than the previous three months.

“Sentiment has also been helped by Brent Crude holding firm above $90 a barrel which creates a positive earnings backdrop for the oil industry.

“It’s impossible to judge a company purely based on three months’ performance but full year guidance implies BP is hoping to quietly get on and do the job, achieving small incremental gains which should be enough to keep the market happy.”

HSBC

“HSBC has put itself on a self-imposed diet, trying to shake off a few pounds of unnecessary weight that it has been dragging around for ages.

“Last year it indicated a desire to find an exit from up to one in five countries in which it operates, in a bid to have a more streamlined operation and a sharper focus.

“We’ve already seen disposals in places like France and Canada and now Argentina has joined the list as it tries to get stronger and leaner. The disposal will incur a $1 billion pre-tax loss but the market doesn’t seem fussed given how the share price has gone up on the news.

“It’s all for the greater good in trying to create the blueprint for how HSBC should look in the future, with Asia at the heart of its efforts.”

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