Europe
Stocks are in positive territory as some of the fears surrounding a trade war have subsided. Bargain hunters have been busy following the surprise news yesterday that the US is planning to slap tariffs on $200 billion worth of Chinese goods. Markets are calmer today, and some fresh buyers have entered the fold.
SKY (LON:SKYB)shares are in demand again today as the bidding war for the company heats up. Comcast (NASDAQ:CMCSA) have offered to pay 1,475p per share for the company, which topped Fox’s bid of 1,400p. Fox is controlled by the Murdoch family, and they have been keen to own Sky outright some time, so a fresh offer from them would not be a surprise.
DFS Furniture (LON:DFSD) and Dunelm (LON:DNLM) confirmed that profit will be lower. The furniture companies blamed the warm weather for the softer-than-expected sales. The hot spell has prompted trips to beaches and parks, and this is drawing people away from the high street. Retailers are suffering from higher business rates and employment costs. Online furniture store Wayfair has seen revenue soar, and the firm’s success is likely to have hurt Dunelm and DFS Furniture.
ASOS (LON:ASOS) confirmed that full-year sales growth would be ‘towards the lower end’ of the 25-30% range. Revenue for the four months until the end of June jumped by 22% and the UK operation made up over one third of revenue. The stock sold off on the back of the announcement, but it is worth noting that ASOS is well-ahead of high street competitors in terms of sales growth. The stock has been pushing higher since September 2015, and today’s negative move could entice fresh buying.
US
Equity markets have bounced back today, as dealers are over the shock that the US is planning to impose tariffs on $200 billion worth of Chinese goods in August. Now that the dust has settled, traders have swooped in to take advantage of relatively cheap stocks. We have seen this situation play out before, and given that the trade standoff between the US and China is still ongoing, traders are likely to continue to tread carefully.
The US consumer price index (CPI) climbed to 2.9%, from 2.8%, while core inflation rose to 2.3% from 2.2%. The reports point to an increase in demand, which is positive for the US economy. There is speculation the Federal Reserve will hike interest rates twice more this year, and a firm inflation rate will make monetary tightening more likely.
FX
EUR/USD is largely unchanged in the wake of the mixed inflation reports from Germany and France. The German inflation report showed the cost of living slipped from 2.2% to 2.1%, meeting economists’ expectations. The French report held steady at 2.3%, but traders were anticipating a reading of 2.4%.
GBP/USD has edged up even though the Royal Institution of Chartered Surveyors issued a downbeat update. The report described the UK housing market as ‘subdued’ and suggested market conditions are likely to remain quiet .Sterling has been in a solid downward trend versus the US dollar since April, and if the wider bearish move continues it could target $1.3049.
Commodities
Gold hasn’t moved much today, and has only recouped a small percentage of yesterday’s losses. The metal has been in a downward trend since April, and if the negative move continues it could target $1,236. Given the lack of volatility in the US dollar index, it’s no surprise that the metal has been in a small trading range today.
WTI and Brent Crude are subdued in the wake of the severe sell-off that took place yesterday. The trade tensions between the US and China mean that traders are concerned about future demand levels. It was also reported yesterday that Saudi Arabia increased oil output by over 400,000 barrels per day, and that added to the pressure on the oil market. It’s concerning that oil has failed to muster up a rally today given the major drop yesterday.
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