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Europe firmer as trade fears subside

European equity markets are higher this morning despite the sell-off in Asia overnight. 

Dealers are content to pick up European stocks as they feel Chinese markets will bear the brunt of the tit-for-tat tariff spat between the US and China. The optimism in Europe is also being driven by a report that the US might suspend threats to impose tariffs on EU cars.

Superdry shares are in demand after the company posted a strong set of full-year figures. Underlying pre-tax profit and revenue jumped by 11.5% and 16% respectively. The annual dividend was boosted by 11.4% to 31.2p. A special dividend of 25p was announced too, on account of the double-digit growth in profit and revenue. Seeing as the company issued a downbeat update in May, today’s announcement of a special dividend was a nice surprise. The company plans to spend between £50 million and £60 million on capital investment, and the focus will be on technology and infrastructure. This is a wise decision since the wholesale and online divisions are outperforming shops in terms of sales growth. The stock gapped higher this morning, but it has been in a downward trend since January, and if the short-term positive move continues it could target 1,500p.

The sugar business continues to weigh on Associated British Foods, while Primark is still the star performer. In the three months until June, sugar division revenue fell by 17%, due to weak EU sugar prices. Nine month like-for-like sales at Primark jumped by 6%, but it is worth noting sales growth in the first-half was below that of the same period last year. Given the poor performance of other UK retailers lately, any same-store sales growth is impressive. The share price has been in decline since October 2017, and if the bearish move continues it could target 2,336p.

Persimmon shares are in the red after the firm announced a slowdown in sales growth. First-half revenue jumped by 5%, while the firm saw an 8% rise in revenue in the same period last year. The firm revealed that cost-cutting should assist underlying operating margin. According to Nationwide, UK house prices grew at their slowest pace in five years in June, and this is adding to the weaker investor sentiment.

EUR/USD has rallied on the back of the strong German manufacturing orders, which jumped by 2.6% in May, while economists were expecting an increase of 1.1%. The April report was revised from a 2.5% decline to only a decline of 1.6%.

GBP/USD was given a boost by Mark Carney, the governor of the Bank of England, after he confirmed that tighter monetary policy was needed. Mr Carney added that he believes the slowdown in the first-quarter was temporary. 

At 1.15pm (UK time) the US ADP report is released, and the consensus estimate is for 190,000 jobs to have been added in June.

Barnes & Noble shares will be in focus today after the company fired its CEO Demos Parneros on Tuesday. A breach of company policy was cited as the reason for his departure.

We are expecting the Dow Jones to open up 126 points at 24,300 and we are calling the S&P 500 up 14 points at 2,727.

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