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Stocks edge up as global sentiment improves

Equity markets in Europe are slightly higher this morning, with traders cautiously optimistic. 

The concerns about geopolitical tensions in relation to Syria and Russian sanctions have faded a little.

The broadly positive economic data out of China overnight left traders slightly more hopeful about the state of the global economy. The Chinese economy grew by 6.8% in the first-quarter, slightly ahead of the 6.7% expected. The retail sales report showed growth of 10.1%, and that was an improvement on the previous figure of 9.7%. Mining companies like Anglo American, Rio Tinto and Antofagasta are higher on the back of the Chinese numbers.

Primark continues to be the best performer at Associated British Foods. The fashion house’s profit rose amid slightly lower margins, but the strengthening of the pound against the US dollar should bring about higher margins in the second-half. Primark has been performing well in a weak retail environment, and it has plans to expand. The grocery and ingredients business saw an improvement in margins, but the sugar division continued to see profit fall. On the plus side, the company has the lowest cost base in the EU, so it is well-positioned to deal with the subdued sugar market. 

JD Sports revealed a 25% jump in full-year profit, on the back of a 33% rise in revenue. The popularity of sports and leisure wear assisted the company in producing a record profit, and the strong figures are in stark contrast to a sluggish UK retail sector. The company is performing well on the high street and online, and its expansion overseas is clearly paying off. The share price gapped higher today, and if the positive mood continues it could target 400p.

GBP/USD was helped along by the fall in UK unemployment and the rise in earnings. The unemployment rate fell to 4.2% from 4.3%, and the average three-month earnings rose by 2.8%. Since the UK inflation rate is 2.7%, this should take some of the pressure off the British consumer. The solid numbers from the UK today add weight to the argument the Bank of England will hike interest rates next month.

EUR/USD was nudged lower by the disappointing German ZEW economic sentiment report. The reading was -8.2 – its lowest in over five years, and that compared with a reading of 5.1 in March. It would appear that all the talk of a trade war is eroding economic sentiment in Germany.

At 1.30pm (UK time) the latest US housing starts and building permits are released, and the consensus is for 1.26 million and 1.32 million respectively.

Goldman Sachs and Johnson & Johnson report first-quarter results later today. 

We are expecting the Dow Jones to open up 142 points at 24,715 and we are calling the S&P 500 up 15 points at 2,692.

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