Originally published by CMC Markets
Equity markets are a little lower today as traders are bracing themselves for the US-China trade spat to take another negative turn.
Europe
It has been reported that President Trump is close to pulling the trigger on $200 billion worth of tariffs on Chinese imports, but only imposing a 10% levy instead of the 25% that was originally discussed.
Dairy Crest (LON:DCG) said it expects first-half revenue and profit to be ahead of last year’s figures due to strong demand from its well-known brands, Clover and Cathedral City. The group is going to milk the Cathedral City brand, and it plans to launch two new products under that banner. The company cited the warm weather for the underperformance of Frylight, as oil sales were down across the board in the UK. The stock has been in decline for nearly 15 months, and if the bearish move continues it could target the 440p region.
GVC Holdings (LON:GVC) shares are in the red after Barclays (LON:BARC) trimmed its price target to 1,187p from 1,220p. Last week the gaming company reported a rise in first-half revenue and underling operating profit of 8% and 17% respectively. The firm confirmed that trading in the UK division were a little on the soft side, and that it will be looking to the US for new opportunities.
Petra Diamonds (LON:PDL) shares are higher after the struggling mining company confirmed it is on track to achieve its previously stated production guidance. Under the leadership of Johan Dippenaar, the company raised $170 million earlier this year via a rights issue in order to tackle its mounting debt problem. The capital raising was crucial for the company’s survival and the stock has suffered since. Today it was announced that Mr Dippenaar will be stepping down as CEO, but will remain at the firm until a successor is found.
US
Stocks are mixed as dealers are nervous about the possibility of a new round of tariffs being imposed on Chinese imports. Should Washington DC go down the route of additional tariffs, traders would be fearful of a retaliation from Beijing. The Chinese authorities could curtail the activities of US businesses operating in the country.
Tesla (NASDAQ:TSLA) shares took a knock after the Saudi Public Investment Fund confirmed it invested $1 billion in Lucid Motors, and what will facilitate the launch of their first electric vehicle in 2020. The timing of this update isn’t great for Tesla, seeing as the company has been dogged by negative publicity in recent weeks. The Saudi’s are already investors in Tesla and it seems they are spreading their wealth, and given the erratic behaviour of Elon Musk, who can blame them?
FedEx (NYSE:FDX) are higher this afternoon as traders await the first-quarter results, which are due out after the close in New York tonight. The company has been performing well in recent quarters thanks to the rise in online shopping. The delivery services posted a rise in full-year revenues and profits in 2018 and it also raised its outlook for this year. The stock has been rallying since June, and if the bullish trend continues it could retest the $266.00 region.
FX
EUR/USD is higher on the day thanks to a slide in the US dollar. Uncertainty around the trade standoff between the US and China has hurt the greenback, and currency traders have trimmed their net long positions on the US dollar. The final reading of eurozone August CPI was 2% - unchanged from the preliminary reading. It is worth noting that the July final reading was 2.1%. Today’s report suggest that demand in the currency bloc is weakening. The European Central Bank (ECB), aim to wind down their bond buying scheme this year, and they are unlikely to raise interest rates until at least the back end of 2019. The ECB would like to see firmer demand before they start heading in the direction of monetary tightening.
GBP/USD is also being lifted by the slide in the US dollar index. The political rumblings surrounding Brexit continue, but that hasn’t stopped the pound from driving higher over the past month. Today the pound hits its highest level against the US dollar since late July, and while it remains above the 1.3000 mark, its outlook could remain positive.
Commodities
Gold has been given s lift by the softer US dollar but the commodity is still enduring low volatility. Today we saw the 10-year government bond yield hit 3%, and should the yield remain high, we could see pressure on the US, which may dent gold. The metal has been in a downward trend since April, and while it remains below the 50-day moving average at $1,209 its outlook is likely to remain bearish.
Oil is higher as supply concerns in relation to Iran persist. The US imposed sanctions against Iran are set to be implemented in November, and already countries like India are reducing their imports from the country. Washington DC want to squeeze Iran in order to strike a new deal regarding their nuclear programme. Some traders are looking to Russia and Saudi Arabia to increase output in order to prevent a surge in the oil price, but a firmer energy market suits their agenda.