market relief

Equity markets suffered severe losses as investors are worried the relationship between the US and China has been strained by the arrest of Meng Wanzhou, the CFO of Huawei. 

Europe

The Chinese businesswomen faces possible extradition to the US as the company is alleged to have breached sanctions in relation to Iran. The US-China relationship was moving in the right direction after the G20 summit, and now dealers feel all the good work could be undone. It is a broad based sell-off that we are seeing in London, as mining, energy, financial and consumer stocks are all lower.  

DS Smith shares are lower despite the company reporting a solid set of first-half results. Revenue ticked up by 15%, and profit before tax jumped by 27%. The group issued an upbeat outlook and confirmed the second-half of the year got off to a good start.  The firm is considering sell-off its plastics business, and it believes the division could be worth up to $800 million. The interim dividend was upped by 14%, and that is a clear sign the group is confident in its ability to generate future earnings. The stock has been in decline since June, and if the negative move continues it might target 300p.

Ted Baker issued a trading update, and group revenue for the 16 weeks until early December dipped by 0.2% compared with the same period last year. The fashion house blamed the poor timing of deliveries for the relative under performance in the wholesale sector. Retail sales jumped by 2.3% and online sales rose by 18%. The share price sold-off severely on Monday over allegations of inappropriate behaviour by the firm’s founder and CEO, Ray Kelvin. Today, the group confirmed that Herbert Smith, law firm, are looking into the matter. The stock has been in a downward trend since March, and support might come into play at 1,250p.

The remote gambling association announced that firms will stop advertising during live sporting events. William Hill, Paddy Power Betfair and GVC have lost ground today.

Ferrexpo announced a special interim dividend of 6.6 cents. The company confirmed that pellet premiums have remained at high levels in the first-half of 2018, and demand is tipped to be strong in 2019. 

US

The major stock markets are all lower today as dealers are worried the relationship between the US and China has taken a turn for the worse. The additional strain to an already fragile relationship has left traders feeling anxious, and that is why they are in risk-off mode today.

There were mixed economic reports from the US today. The ADP employment showed that 179,000 jobs were added in November, but economists were expecting 195,000 jobs. The jobless claims reading fell by 4,000 to 231,000, and the consensus estimate was 225,000. The goods trade deficit reached $55.5 billion – a 10 year high, and the goods deficit with China hit a record high. The trade figures might embolden Mr Trump to take a tougher stance with Beijing in relation to trade, and that is hurting sentiment.

Kroger confirmed that same-store-sales in the third-quarter ticked up by 1.6%, which was just below the 1.65% that traders were expecting. The retailer blamed remodelling of shops for the slightly lower than expected performance.  Gross profit margin fell by 91 basis points as higher costs and deeper price cuts hit the group.

FX

The US dollar is lower due to mixed economic data from the US and the perceived poor relations between the US and China. Amid a trade dispute, the Federal Reserve are likely to take a slower approach to hiking rates in 2019.

GBP/USD is being helped by the softer greenback and the current political situation in the UK. The developments in British politics this week suggests the possibility of a ‘no-deal’ Brexit is very unlikely now, and that is helping the pound.

EUR/USD has been lifted by the drop in the US dollar. German industrial orders grew by 0.3% in October, which comfortably exceeded the -0.4% drop that economists were expecting.  

Commodities

Gold has reached its highest level in nearly five months, and the weaker US dollar, and major decline in global stock markets is driving up demand for the commodity. The metal has been broadly moving higher since August, and if the bullish move continues it might target $1,265.

Oil has tumbled yet again even though OPEC have agreed to cut output. The cartel will give further details on the size of the cut tomorrow, but traders are sceptical it won’t be enough to prop up the price. Going into the meeting, there was talk of a 1.4 million barrel cut, and it was reported that Saudi Arabia are keen for a cut of only 1 million barrels. The energy information administration report showed that US oil stockpiles by 7.32 million barrels, while traders were only expecting a drop of 942,000 barrels.

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