Market buzz: Has gold lost its allure as a safe-haven?

As ever, weakness in the pound helped to stem the selling on the top-flight index, but less so on the FTSE 250.

Commodities-focused issues were weakest, while defensive finally found a bit of a bid, as did shares of RBS and Royal Mail, with the latter two companies' shares bolstered by broker upgrades.

FTSE 100 down 27.48 points to 7,603.85.

1611: Courtesy of IG's Chris Beauchamp: "UK and European investors are engaging in damage limitation this afternoon, lifting their home markets off the lows, but in the US few buyers are yet to be found today. Perhaps their bruising overnight, when an apparent success in pushing the Dow back to 25,000 was followed by swift fall, has tempered their ardour. Optimism about the global economy has also been tempered as the two strongest pillars bicker over trade tariffs, with equities still looking vulnerable to more downside after their recent gains."

1534: CBOE's VIX up 15.43% to 14.21 (not very high frankly).

1514: Atlanta Fed GDPNow model predicting growth of 4.7%, down from 4.8% previously.

But in the aggregate, UBS's Arend Kapteyn says: "Our DM real GDP now-cast model (see "DM hard data nosedives") accurately predicted the slowdown in DM growth from 2.4% in Q4 to 1.6% in Q1. We had presumed that this 'soft patch' would be temporary and that by end-Q2 DM growth would be back above 2% (for reference: the 2010-2017 average for DM is 1.8%)."

UBS's tracking estimate for US Q2 GDP last at 3.8%; nevertheless, Kapteyn adds that "it may well be in excess of 4.0%".

1433: Gold futures on COMEX are slipping 0.23% to $1,277.20/oz., prompting Capital Economics to wonder aloud if the yellow metal has lost its 'safe haven' allure.

Interestingly, they point out how: "Oil prices are still 56% higher than at this time last year, which means that inflationary pressures are building regardless of the latest fall in prices. Indeed, US inflation expectations – as proxied by 5-year 5-year forwards – jumped on Friday."

In any case, their answer is "no", referencing US dollar strength and technical selling as reasons for its seeming detachment and telling clients to expect gains in case trade war fears ramp-up.

Investors holdings of gold remain near five-year highs they add.

Yet their end-2018 price forecast remains at $1,300/oz..

1330: Housing starts in the US increased in May at a 5.0% pace month-on-month to reach an annualised clip of 1.350m (consensus: 1.311m).

Permits on the other hand fell by 4.6% on the month to hit 1.301m (consensus: 1.35m).

"Starts likely won't be sustained at this level, given that permits are weakening. The pace of permit issuance is much less sensitive to the weather than starts, and it usually reflects the pace of new home sales, which we think have now peaked for this cycle," says Pantheon Macroeconomics's Ian Shepherdson.

1319: Shares of Norwegian Air are rising by more than 4% after its chief says it has received other bid approaches aside from those tabled by IAG and Lufthansa. Perhaps, but for the FT's Lex column upside in the stock is limited.

1318: PBoC Governor has reportedly assured investors central bank will use appropriate monetary policy tools in order to insure liquidity.

On a related note, earlier UBS said: "We think RRRs may be lowered by as much as another 200 bps this year. We maintain our 2018 GDP growth forecast of 6.6% but see more of a downside risk to this forecast."

1033: E.ON has just announced it is increasing its standard variable electricity and gas prices, following rises from rivals.

1029: The Ifo Institute is revising down German growth forecast for 2018-2019, slashing forecasts for this year to 1.8% from 2.6%, with 2019 cut to 1.8% from 2.1% due to the risks around a euro crisis sparked by Italy and a potential trade war with the US.

“The economy developed significantly more weakly than anticipated in the first few months of the year,” Ifo economist Timo Wollmershaeuser says.

“The global economic risks have risen significantly,” he adds.

1017: Construction in the Eurozone increased 1.8% month-to-month in April, with the year-on-year figure also hitting 1.8% from an upwardly revised 1.2% in March.

A 4.0% jump in civil engineering, primarily in Germany, was the key driver but residential construction also increased.

"Finally, an upbeat economic report in the Eurozone," say economists at Pantheon Macroeconomics, after cold weather constrained large-scale building projects in the latter part of the first quarter, pushing activity forward to the beginning of the second.

"Across countries, strong gains in France, Germany and Italy drove the EZ headline higher, offsetting a decline in Spain. Even if the headline index remains unchanged for the rest of the quarter, it would still increase a solid 1.5% quarter-on-quarter, rebounding from a 0.4% decline in Q1. As a result, we are confident that construction will provide a positive boost to GDP growth in Q2."

0926: Women’s value clothing retailer Bonmarche is defying the retail doom and gloom, posting a 38.1% jump in full-year pre-tax profit even as revenue declined, as the online segment provided a boost.

0901: The profits warnings keep flying, with Footasylum crashing 45% as it reported in-line earnings for last year but warned earnings for this year would be hit by increased investment in its stores and website.

Peel Hunt changed its stance on the stock from ‘hold’ to ‘reduce’. Analysts say: "FY18 numbers are in line with expectations but the outlook statement is unfortunately flagging a couple of issues which means that forecasts have to fall today.

"There are lots of elements to like about the Footasylum story: the brand is growing top line fast but there are longer term concerns about product allocation that won't go away. Negative forecast momentum will not be taken well by the market, and we would expect the shares to struggle today."

0859: Walt Disney is readying an increased offer for 21st Century Fox, adding a cash component to its previously agreed US$52.4bn stock offer for Fox assets, according to the Financial Times.

The boss of Pfizer has also warned that Brexit threatens UK life sciences, the FT says, with Britain needing to "cement its position" or risk erosion of this critical industry.

0834: Profit warnings from Debenhams and McCarthy & Stone this morning sending both shares tumbling in the teens.

The department store group says annual profit will be at least 20% less than market expectations as it faces weak consumer spending and discounting by competitors.

Retirement housebuilder McCarthy has packed off its CEO into early retirement as it too cites consumer caution, as well as launching a strategy review amid softer pricing trends.

0821: Report cites Chinese officials as saying banking and insurance sectors stable, amid a tad of market chatter regarding possible moves by Beijing to ease policy, such as by reducing banks' reserve requirement ratio.

As an aside, the yield on the benchmark 10-year US Treasury note is down by five basis points at 2.87% with the intra-day low to be found at 2.85%. Two-year note yield off by four basis points to 2.51%.

"Overall we would suggest that, in line with one of our previous themes, the recently enacted tax reforms have increased the ability of US companies to invest but the uncertainty around Trump’s trade policies has decreased the demand to do so," Rabobank says.

0818: Chinese ambassador to Australia, Cheng Jingye, says "less bias and bigotry" needed to repair relations, calls on Canberra to drop Cold War mentality.

0807: The FTSE 100 drops 1.0% on the open to 7,554.94, its lowest level in over a month.

0751: European stock markets sure to fall on the open. The Shanghai composite index is down almost 5% (and below the psychological 3,000 point level), which would make it the biggest drop since 2016 as the White House prepares $400bn-worth of possible tariffs on Chinese made goods.

Dollar/yen down by 0.83% to 109.613 in reaction to the news on the global trade front.

Commenting on the scope for further tensions and the impact that they might have, Rabobank says "Of course, neither side wants multi-dimensional, let alone economic, confrontation. So while it’s prudent to think of where strategic logic suggests this could go, it's equally prudent to think of what deal both sides could live with.

"How much Chinese opening up will do? How much US compromise? Only if the answers are 'none' and 'none' should we head for the bomb-shelters: what are the answers? What does your gut tell you about both?"

Among the 'nuclear' options that Beijing might mull are devaluing its currency, which the Dutch broker says would be an end-of-the-gold-standard moment (as with the UK in 1931), or ratcheting up geopolitical tensions, be it on the Korean peninsula or elsewhere.

0745: Economists are not expecting a Bank of England rate hike this week and increasingly are not expecting one in August any more either.

Reuters said its poll of economists found none expecting a rise this week and some getting cold feet about their forecasts for an August hike, while less than 55% of analysts polled by Bloomberg expect a hike in August, down from 60% from May's survey.