The European session got off to a cautiously optimistic start following on from the mixed session in Asia overnight. 

Europe

Trade talks between the US and China will resume next week, and dealers are hopeful, but we will have to wait and see. The heightened tensions between the US and Turkey caused the Turkish lira to take a leg lower, and this reignited fears that the European banking system could be shaken by either defaults or non-performing loans from Turkey. 

Kingfisher shares are in the red after a couple of investment banks cut their price targets for the stock. UBS lowered its target from 265p to 260p, and HSBC cut its target to 350p, from 365p. These announcements come one day after Kingfisher posted respectable second-quarter results, but the French division continued to underperform.

Evraz shares have recouped some of the lost ground it lost lately. The steel marker has operations in Russia, Ukraine and Central Asia, and whenever there is tension between The West and Moscow, the stock usually takes a hammering. The latest round of US sanctions against Russia, for its alleged role in the poising of a former Russian spy in the UK, dented the stock. While the stock remains below its 50-day moving average at 525p, it outlook might be negative.     

Kaz Minerals has had its target price cut by UBS and Barclays this morning, and this drove down the share price of the stock. The Swiss bank slashed its target price to 660p from 940p, and the London-listed bank now has a price target of 760p, down from 800p. Earlier this month, Kaz announced plans to buy a copper mine in eastern Russia for $900 million. The share price slumped on the back of this as investors felt the company was overstretching itself, and the lack of infrastructure near the mine also worried shareholders. The stock has dropped to its lowest level in over one-year today, and if the bearish move continues it could target the 460p region. 

US

The negative sentiment in Europe has seeped into the US, and we seeing a slight decline in equities. Dealers will be paying close attention to the trade talks between the US and China, as well as the political wrangling with Turkey. US stocks are holding up relatively well, but if global sentiment sours, the impressive strength of the Dow Jones and S&P 500 could be chipped away at.

The University of Michigan consumer sentiment survey fell to 95.3 in August, from 97.9 in July, and the consensus estimate was 98. This is a sizeable miss, and points to a softening in consumer sentiment, which is a little worrying, considering the Federal Reserve are in the process of hiking interest rates.

FX

The US dollar index was drifting lower throughout the session as traders locked in profit as the currency reached its highest level in over a year during the week. The impressive Canadian CPI numbers sped-up the dip in the US dollar across the board.

USD/CAD sold-off sharply after Canadian CPI surged to 3%, from 2.5%, while economists were expecting it to hold steady at 2.5%.

EUR/USD slipped in the wake of the latest eurozone inflation figures. On a month-on-month basis, the cost of living in the eurozone dropped from 0.1% to -0.3% - meeting estimates. The yearly figure held steady at 2.1%. It is concerning that the cost of living in the currency bloc has slipped, as it implies softening demand. The single currency has received assistance from the fall in the US dollar this afternoon, but keep in mind it also has the volatility in the Turkish lira to contend with.

GBP/USD had a subdued session due to a lack of economic announcements from the UK. Sterling has lost a major amount of ground versus the US dollar in recent weeks, and uncertainty around Brexit is the main factor. The UK’s firmer CPI rate and the impressive retail sales numbers couldn’t prop up the pound, and this could be an indication of what is to come. The slide in the greenback this afternoon gave help to sterling, but the pound can’t rely on a soft greenback forever.

Commodities

Gold has managed to edge higher after a rough week. Yesterday, the metal fell to a level not seen since year 2017, and today some short-covering has nudged the price higher. Gold’s recent demise has been driven by the rally in the US dollar. The US is the standout performer of the major global economies, and the talk of a rate hike from the Federal Reserve in September and December is hurting gold.

WTI and Brent crude oil after higher as traders are hopeful that next week’s trade talks between the US and China will be fruitful. During the week, the oil market fell to multi-month lows as traders were worried about future demand, and the huge jump in US oil stockpiles added to the negative move. The prospect of Washington DC and Beijing clearing up the trade spat was prompted buying.  

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