Trade tensions have risen again as China threatens to impose tariffs on $60 billion worth of US imports. The Chinese government said they reserve the right to impose further tariffs should they see fit. Traders are worried the tough line that both sides are taking could hurt global growth. Meanwhile, the latest US non-farm payrolls report was released this afternoon, and by-and-large it was a positive update. 

US

Equities are largely positive in the wake of the positive non-farm payrolls update. In July, 157,000 jobs were added, while the consensus estimate was 190,000. The June report was revised higher to 248,000 from 213,000. The unemployment rate dipped to 3.9% from 4%, meeting expectations. On a yearly basis, average earnings remained at 2.7%, also in line with forecasts. Taking an average of the headline July figure and the revised June number, it paints a positive picture of the US labour market.

During the week, the Federal Reserve issued an optimistic outlook on the economy, and suggested there will be two more rate hikes in 2018. Today’s jobs report points to a continuation of the positive momentum in the jobs market, and adds weight to the argument for a hike in September and December.

Europe

RBS announced plans to pay a 2p interim dividend, but it is conditional on a settlement with the US Department of Justice (DoJ). It will be the first dividend in a decade. This not only makes the stock more attractive to hold as investors like to receive a cash payout, but also underlines how much of a turnaround the bank has undergone in recent years. RBS' second-quarter pre-tax operating profit fell by 51% to £613 million, but it is worth pointing out the bank has set aside £1.04 billion in relation to the DoJ fine. The common equity tier 1 ratio is now 16.1%, dependent on the DoJ settlement. Now that the bank has a robust balance sheet, and is potentially going to pay a dividend again, the sentiment surrounding the stock might become even more bullish.

William Hill shares are lower on the day after the firm swung to a first-half pre-tax loss of £820 million, and that compares with a profit of £93 million in the same period last year. The gaming company incurred an exceptional charge of £883 million relating to the government crackdown on fixed-odds betting. William Hill criticised the government’s decision to cut the maximum stake on fixed-odds betting and claimed it will have ‘long-term consequences’ on the sector. The company is embracing technology as online sales growth jumped by 11%, while the stores on the high street saw a 3% fall.

Pets at Home posted an 8.1% rise in first-half revenue. Retail revenue rose by 6.9% and revenue from in-store vet services jumped by 18.4%. The company took the decision to cut their prices in order to attract more business, and the tactic is clearly working       

FX

GBP/USD lost ground earlier in the session after Mark Carney, the governor of the Bank of England (BoE), issued a less than bullish statement. Mr Carney suggested the BoE hike rates once per year in the next few years. The update seemed at odds with the rate hike yesterday, and sterling has been lacklustre of because of it.

EUR/USD had a mixed a session and is now largely unchanged on the day. Germany, France, Spain and Italy all posted disappointing services data updates. The growth rate in all the reports slowed, and this is concerning given how important the sector is to their respective economies. The euro saw volatility on the back of the US jobs report.  

Commodities

Gold rallied on the back of the non-farm payrolls report. This morning gold dropped to a fresh one-year low, and despite the bounce back in the last few hours, the metal is still in the same downtrend that begun in April. If the move higher continues in the near term, it might run into resistance at $1,236.

WTI and Brent crude oil have been range-bound today. The energy market has lost ground recently due to fears about over-supply. The latest update from Opec showed that output jumped in July. Saudi Arabia’s output was near an all-time high, while Iraq, UAE and Kuwait all had multi-month highs in terms of production.
 

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