Europe
Trade tensions and a mixed US non-farm payrolls report has put pressure on stocks. The stand-off between the US and China has ratcheted up a level, and President Trump has made it clear he could ramp up tariffs again if needed. Equities are set for a subdued finish to the week.
ITV (LON:ITV) shares are higher today after Societe Generale (LON:0J6Y) raised its outlook on the stock to buy from sell, and the French bank also upped its price target price to 220p, from 150p. ITV’s share price has been in an upward trend since April, and today it reached an 11-month high, highlighting how bullish investors are on the stock.
Rolls-Royce (LON:RR) announced it is selling its loss-making commercial marine business to Kongsberg for £500 million. The move is part of Rolls Royce’s restructuring plan to concentrate the business on aerospace, power and defence sectors.
Inmarsat (LON:ISA) have rejected a second takeover offer from EchoStar (NASDAQ:SATS). The US company confirmed it is still interested in acquiring Inmarsat. EchoStar has until 5pm today to make a formal offer for the British firm, but they are seeking to push back the deadline. Inmarsat’s shares have been drifting lower since late June, but given that EchoStar are still interested in the company we might see renewed interest.
US
Stocks are broadly higher despite the tit-for-tat tariff spat between the US and China. Both sets of levies have kicked in, but traders haven’t been spooked by it. The mediocre jobs report lifted market sentiment.
The US jobs report was a mixed bag. In June, there were 213,000 jobs added to the payrolls, which comfortably topped the 195,000 estimate. The May figure was revised from 223,000 to 244,000. The unemployment rate jumped to 4% from 3.8%. On a yearly basis, average earnings jumped by 2.7%, but economists were anticipating a reading of 2.8%. There were positive and negative aspects to this report, but the takeaway message wasn’t overly bullish. The fact average earnings remained steady at 2.7% doesn’t suggest that employers are keen to offer higher salaries to attract potential workers.
Last night the minutes from the Federal Reserve showed that central bankers are happy to keep hiking interest rates, but given the move in the US dollar, it would appear that traders aren’t that fearful of additional interest rate hikes. In light of today’s data, some dealers feel the prospect of two more rate hikes this year has diminished.
FX
EUR/USD is higher today on the back of the positive German industrial output report, and the slide in the US dollar. In May, German industrial output jumped by 2.6%, while economists were only anticipating an increase of 0.3%. The drop in the greenback in the wake of the US jobs report added to the bullish move on the euro.
GBP/USD was pushed higher in the morning by the latest Halifax UK house prices report. The update showed that average UK house prices jumped by 0.3% on a monthly basis in June, meeting analysts’ estimates. Sterling also rallied on the back of the dip in the US dollar.
Commodities
Gold has gained a small bit of ground on the back of the US jobs report. It is concerning that gold has only edged up slightly given the drop-off in the US dollar. In recent months there has been a strong inverse relationship between the gold market and the US dollar, but the upward move in gold is disproportionally small compared with the downward move in the US dollar. Gold has been in a downward trend since April, and if the negative move continues it could target $1,236.
We could see disruption to the oil market now we have edged closer to a trade war. The energy market is seen as a barometer for the global economy, and should growth slip due to the tariffs, we might see a decline in demand for oil.
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