Morning Briefing – European travel stocks dip

<p>It does look like there’s been a peripheral impact on sentiment in European markets from the tragedy overnight in the coastal city of Nice, southern France.</p>

  • It does look like there’s been a peripheral impact on sentiment in European markets from the tragedy overnight in the coastal city of Nice, southern France. A slow start this morning after what’s turned out to be solid week for global stocks. There were at least 84 fatalities after a lone attacker drove a lorry about 1½ miles along the sea front during Bastille Day celebrations. Latest reports suggest 18 of the injured are in a critical condition. Following incidents like these, a number of which have occurred in France over the last two years, travel stocks typically sell off. EasyJet is being particularly hit right now, though it is worth noting that European tourism operators have pulled back from prior levels of activity in travel to France, so the impact for the travel sector overall should be more contained particularly for the larger groups.


Here is how major markets were trading a little before this article was published.

Name Last % Change Net Change Close
S&P FUTURES  2156.25 -0.05 -1 2157.25
DJ INDU AVERAGE 18506.41 0.73 134.29 18372.12
BRENT CRUDE Futures 46.87 -1.06 -0.5 47.37
AUD/USD 0.7653 0.33 0.0025 0.7628
USD/CAD 1.2884 -0.05 -0.0006 1.289
USD/CHF 0.9791 -0.13 -0.0013 0.9804
EUR/CHF 1.0912 0.07 0.0008 1.0904
EUR/JPY 118 0.78 0.91 117.09
DAX 10090.5 0.22 22.2 10068.3
NIKKEI 225 16497.85 0.68 111.96 16385.89
S&P 500 2163.75 0.53 11.32 2152.43
FTSE 100 6657.9 0.05 3.43 6654.47
USD/JPY 105.89 0.54 0.57 105.32
GBP/USD 1.3386 0.36 0.0048 1.3338
EUR/GBP 0.8323 -0.07 -0.0006 0.8329
10Y BUND     100.283 -0.1 -0.105 100.388
EUR/USD 1.1144 0.23 0.0026 1.1118
SPOT GOLD 1331.95 -0.21 -2.75 1334.7


  • The other major overnight news was China’s Gross Domestic Product (GDP) which came in a minor tick above expectations. The economy managed 6.7% growth in Q2, the same as Q1, and not quite as weak as 6.6% forecast. At best though, it is still stuck at the slowest pace since the global financial crisis.
    A marked cooling of private investment seems to be mostly to blame for the overall soft result. Growth in investment by private firms, which accounts for over 60% of total investment, fell to a new record low in the first half of the year, as businesses retrench in the face of the sluggish economic outlook and weak exports. Retail sales picked up strongly, but fixed asset investment (including property) was slower. Overall, the bias for economic growth still seems to point to the downside, having ticked steadily lower from a peak of 7% in Q1 2015.
  • Elsewhere late on Thursday, we got more clues as to Federal Reserve thinking ahead of the next policy setting meeting on 26th/27th. Three Fed policymakers on Thursday expressed the view that there was no hurry to raise US interest rates in the wake of the UK’s decision to leave the European Union, despite signs that the US economy is near full employment. A core group of voting Federal Open Market Committee (FOMC) members said in speeches or comments to the press that they were now happy to keep interest rates unchanged, potentially for months, whereas just last month, most Fed officials signalled they expected to raise rates at least twice this year. This is helping to keep the dollar offered overall, even though it’s keeping up the fight against the yen.
  • It will be quite a busy Friday afternoon for economic data: US CPI is first among the major releases; growth of 0.3% is forecast, 10 points higher than May; US Retail Sales is also on tap, the headline is seen slowing to 0.1% from 0.5% last month; US Industrial Production is on the slate; a big jump into the positive at 0.4% from minus 0.4% is forecast here; whilst Manufacturing production is also seen rising into the black at 0.3% growth from -0.4%. The biggest scheduled economic releases next week will come from the RBA meeting and UK inflation data, on Tuesday, UK employment on Wednesday, and the ECB decision on Thursday.

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