Europe
European equity markets saw a major surge in volatility today as the first half of the day was dogged by negative sentiment, and the recent announcement that there will be a delay to the introduction of some of the proposed tariffs on Chinese goods sent stocks soaring. Last month, President Trump announced that tariffs would be imposed on $300 billion worth of Chinese imports come September, and now some of those tariffs will be delayed until December. In addition, the negotiations between the two sides will take place next month, and that has added to the bullish move. It seems that Mr. Trump blinked first, and the bulls are taking full advantage of the news. With worries about a recession brewing in Germany, political uncertainty in Italy and violent scenes in Hong Kong, the easing up of hostilities between the US and China has been a welcome change to the doom and gloom of the past few days.
TUI saw choppy trading today as the group started off strong in the morning, but the wider market sell-off weighed on the company. The travel sector as a whole in Europe has been suffering due to political uncertainty in relation to Brexit, and some people are curtailing their expenditure as a result. The Boeing 737 Max disaster earlier in the year was also a major issue for TUI, and the company issued two profit warnings year-to-date, but today’s update seems to have drawn a line under the recent negative sentiment. Third-quarter sales ticked up, but sales on a nine-month basis are still down on the year, and the group reiterated its full-year outlook, and it appears the firm is beyond the worst of the recent turbulence.
Aston Martin was hit by a broker downgrade. Credit Suisse lowered their rating for the stock to neutral from outperform, and the bank had a major revaluation of the share price target as I now have a target of 529p, while the previous target was 1,630p. The firm listed on the London Stock Exchange in October 2018, and since it began trading on the exchange, it has lost roughly 75%. In July the company cut its full-year sales forecast, and the share price has been under increased pressure since the change to its guidance.
Financing concerns linger for Thomas Cook as the stock is down again today after the group said yesterday it required an additional £150 million in funding. The struggling travel firm is already in talks with Fosun, who is in talks to acquire the group’s tour business. Like with TUI, Thomas Cook has been hit by the fragile consumer environment. Traders are usually cautious of firms that appear to have funding issues, and that is hanging over Thomas Cook.
US
Wall Street is enjoying a bullish run on the back of the delays to some of the tariffs that were due to kick in next month. Stocks have been subdued recently, and US-China trade tensions have been a major factor, and now the mood has lightened, and that has acted as a green light to the bulls. Electronics, footwear, and clothing are some of the goods that will not be levied with tariffs next month, and Apple is one of the biggest gainers on the back of the news.
The inflation figures were positive. The headline CPI jumped to 1.8% from 1.6%, and the core reading ticked up to 2.2% from 2.1%, and both show a clear increase in demand. It is encouraging to see that demand in on the rise and keep in mind. Interest rates were cut at the end of July, so we might see the CPI rate tick higher in the coming months. James Bullard of the Fed, recently said he wants to play the wait and see the game before making his next vote, so a rate cut next month is not a done deal, especially in light of the announcement in relation to the US delaying some of the tariffs on Chinese imports.
JD.com shares are higher today on the back of solid second-quarter figure results. EPS came in at 33 cents, which was a major improvement on the 5 cents registered in the same period last year. Equity analysts were expecting 7 cents, so it was a big beat on estimates too. Revenue for the three month period increased by 22.9%. The e-commerce platform struck deals with Mulberry and Prada recently, and that helped the latest set of figures.
FX
The US dollar index was lifted by the US inflation figures, and the tariffs delay announcement helped with the positive move. The greenback has been held back by the US-China trade tensions, and we might see some more funds flow into the dollar in light of the trade news.
GBP/USD is largely flat on account of the firmer US dollar. The UK posted impressive jobs data, but traders are still worried about a no-deal Brexit. The jobless rate edged up to 3.9%, and the average earnings rate excluding bonuses came in at 3.9% - its highest level since the credit crisis.
EUR/USD is in the red on the back of the stronger US dollar. German inflation remained at 1.1%, meeting forecasts, but the ZEW economic sentiment reading plunged to -44.1, the lowest reading since December 2011. Germany will announce its second-quarter GDP report tomorrow, and economists are expecting -0.1%, and traders are worried it could be the beginning of the nation’s descent into a recession.
Commodities
Gold sold-off sharply on the back of the news in relation to the US delaying some of the tariffs on Chinese goods until December. The metal hit a new six year-high earlier in the day, once the news broke about the tariffs, dealers dumped the precious metal. The wider bullish trend is still in play, and support might be found around the $1,453 region.
Oil was given a shot in the arm due to the tariff news, and dealers bought into the energy market in the belief that an easing of trade tensions should equate to a higher demand for oil, particularly in China, which is a major importer of the energy.
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