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European markets stabilise, as gold hits a six year high

Asia markets finished the day mixed, unable to pick up the baton from a decent rebound in US markets, after the Chinese central bank set its yuan fix slightly weaker than expected, though crucially it was still set below the key 7.00 level.

This would appear to suggest that while tensions have gone up a notch in the last few days the Chinese don’t want to be seen to ratchet things up further, unless they are forced to by further actions from the US.

Markets in Europe have started on a much more optimistic tone, taking their cues from the rebound in the US, and a slightly calmer tone as investors look towards the next development in the ongoing US, China trade spat.

While markets in Europe appear to be finding a modicum of support after several days of declines it remains to be seen whether this can be sustained when bond yields continue to sink and safe havens continue to see inflows, as gold prices rise to six year highs.

European banks are in focus this morning as Italy’s biggest bank Unicredit reported its latest numbers for Q2, and which saw profits rise 81% to €1.9bn, however a lot of this increase was down to the disposal of its stake in asset manager Fineco. On the revenues side the bank reported a drop of €4.5bn, and lowered its full year guidance for 2019, to €18.7bn.

Commerzbank’s latest numbers were also sobering with Q2 net profits holding steady at €271m, while revenues declined to €2.1bn, a fall of 2.2%. The bank also cautioned that any increase to the bottom line was likely to become much more difficult, especially if interest rate levels continue to decline after September when the ECB is set to cut rates further.

Standard Life Aberdeen latest numbers showed that outflows persisted in the first half of the year, coming in at £15.9bn, though they were down from the £24.3bn seen in the second half of 2018.

These outflows meant that profits were slightly weaker than expected at £280m, a slight miss on market expectations, but enough to send the shares lower in early trading.

Legal and General, on the other hand saw profits rise 11%, helped by its recent annuity deal with Rolls Royce. Individual annuity sales also increased to £497m, while assets under management rose to £1.13bn.

A fall in cobalt prices has hit Glencore’s profits in the first half of the year, and this has forced the company to bite the bullet on its Mutanda mine in Democratic Republic of Congo and close it down. The company also saw profits at its trading unit as a result of losses of $350m on unsold cobalt.

The New Zealand dollar has plunged after the RBNZ unexpectedly slashed rates by 50bps overnight to 1%. The banks forward guidance was also quite dovish with the bank saying that it was concerned about low inflation. Markets were expecting a more modest 25bps, so this move was a surprise and brings the cash rate into line with the its neighbour Australia, whose cash rate is also 1%.

The uncertainty over the next move in the US, China trade saga looks set to see US markets temper some of yesterday’s rebound with a slightly weaker open.

Stocks in focus are set to include Disney after the company missed on profits by a significant margin. Not only did the company miss expectations on its movie studios after taking a write down on its Fox studio acquisition, but it also saw a slide in its resorts business.

With the company also looking to take on Netflix in the streaming space investors appear to have finally woken up to the fact that investment in new areas of growth actually has an effect on short term profitability. The shares look set to open sharply lower on the US open

It’s also a big day for Lyft as it gets set to announce its latest numbers for Q2, as it strives to recover back towards its IPO price of $70 back in April. When the company reported in May for Q1, we did see a marked improvement in revenues, which came in at $776m, with the company guiding that they expected to see a further improvement in Q2 to over $800m. The company also posted a loss of $1.1bn for Q1, though most of that was down to IPO costs, as operating losses stayed steady at $211.5m. For the recent share price rally to be sustained there needs to be evidence that the company has stopped haemorrhaging cash, or we could see the recent recovery dissipate quite quickly.

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