Equity markets are firmly in the red as traders are worried about the state of the Chinese economy. 

Europe

Overnight, Beijing confirmed that imports dropped by 7.6%, and exports declined by 4.4%. The poor import figure underlines weak domestic demand, and that feeds into a wider viewpoint that China’s economy has been cooling for a number of years. The drop in exports adds weight to the argument that Trump’s tariffs tactics are working. The decline in global stock markets at the back end of last year, were partially driven by a fear of a global slowdown, and now those fears could be reignited.

JD Sports shares’ are higher after the fashion house reported a strong update. The group confirmed that like-for-like sales for the 48 weeks until early January grew by 5%. The company had a robust Christmas period and its international expansion is going well. The group opened its first five stores in the US, and two were opened in Thailand. Last year, JD Sports acquired Finish Line sports in the US, and they plan to convert 15 Finish Line stores in the first-half of 2019. Unlike it competitors, JD Sports didn’t engage in short-term ‘discounting unnecessarily’ and that stood to the firm in terms of gross margin. The stock gapped higher this morning and has been pushing higher since late December, and if the bullish move continues it might target the 475p region.

Premier Oil shares have sold-off sharply after the company stated it is contemplating raising funds to buy $1.5 billion worth of oil and gas assets from Chevron. The London-listed energy company has a market capitalisation of approximately £644 million so the potential bid for Chevron’s assets is ambitious. The group is considering selling some or all of its South American assets, and undergoing a rights issues in order to pay for the deal. Given the weakness in the underlying oil market an enormous expansion might not be sensible right now. The stock has been in decline since October, and if the bearish move continues it might target the 55p area.

Dechra Pharmaceuticals announced that trading was ‘strong’ in the first-half and in-line the forecasts. Revenue for the six-month period increased by 18%. The firm said that Brexit contingency preparations are going well. The stock has been range bound in recent months, and a break above 2,374p, might put 2,500p on the radar. 

Barclays downgraded Paddy Power Betfair to equal weight from overweight and lowered the price target to 6,700p from 7,600p. The bank also trimmed its price target to 1083p, from 1180p.

US

The major indices are lower today as sentiment has been soured by the Chinese trade figures. The fall in Chinese exports will be welcomed by the Trump administration as it will be seen as a sign that the trade war strategy is working. Also, the gloomy import numbers show that the Chinese economy is slowing, and that might prompt Beijing to soften its stance with regards trade relations. 

Last week we heard that US-China trade talks ended on a positive note, and some details were announced, but we have yet to hear the final outcome. The announcement overnight suggests the US have the upper hand.

Citigroup announced a 21% fall in fourth-quarter fixed income, currency, and commodity (FICC) trading, and the bank cited poor trading conditions for the disappointing dealing numbers. Last month, the Wall Street firm said that trading revenue would be down, so investors were braced for poor figures. Total earnings per share for the quarter were $1.61, topping the $1.55 forecast, while group revenue was $17.1 billion, undershooting the $17.6 billion that analysts forecasted. 

Newmont mining is to takeover Goldcorp in a transaction that is worth $10 billion. Last year we saw Barrick Gold buyout Randgold Resources, and that created the largest gold mining firm in the world, and the Newmont Goldcorp group will rival the organisation. Now that the commodity super cycle is over, we might see a return to quality buying quality. 

FX

EUR/USD hasn’t moved much today even though the eurozone continues to produce poor economic data. German wholesale price index last month dropped by 1.2% on a monthly basis, and eurozone industrial production fell by 1.7% month-on-month. The euro area is undergoing an economic downturn, and the region might be heading for a recession.

GBP/USD has experienced low volatility as traders await the key Brexit vote tomorrow. Theresa May’s deal is very unpopular, and it widely expected to be voted down, but that being said, the pound has largely moved higher versus the US dollar since early December. Volatility is likely to remain low, until the vote is out of the way.

Commodities

Gold has edged higher yet again, but it continues to lose steam once it approaches the $1,300 mark. The metal has been in a strong upward trend since mid-November, and a break above $1,300 might bring $1,326 into play.

Oil is in the red after on the back of the disappointing Chinese trade figures. The fall in imports highlights weaker domestic demand, the second-largest economy in the world is a major importer of energy, and the concern is that future demand will be softer. The China story is a global demand story, at the moment the outlook isn’t too rosy.

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