Equity markets are higher again as traders are less fearful of coronavirus, and the pledge by China to cut tariffs on some US imports has helped sentiment too. 

Europe

The health emergency isn’t getting any better but traders have shrugged off the fears that previously gripped the markets. China announced plans to cut levies on $75 billion worth of US imports next week. Traders jumped on this story as it shows the trading relationship between the two sides is taking a positive step. Beijing are under tremendous pressure on account of the worsening health situation, so the promise to lower tariffs is a convenient way to boost sentiment in the markets.    

Royal Mail continue to deliver a poor return on investment as the stock price has fallen again after the company said the outlook was challenging. The group doesn’t have the best relationship with its workforces, and it needs to reorganise the business, and unless major ‘progress’ is made on the transformation front, the group might not achieve its targets. The company’s parcel delivery business is making up for the poor performance of the letter delivery division. Management want the group to focus on parcel delivery at home as well as abroad, but until great strides are made in that direction, the stock price is likely to remain subdued.

Beazley’s extremely impressive investment income helped the group more than double its pre-tax annual profit. Investment income soared by more than 500%, and in turn the earnings metric increased by 250%.  The company can’t just rely on investment income, especially seeing as there were other aspects of the business that were more mediocre by comparison. Net premiums rose by 11%. The underwriting division was a weaker component of the group as the claims to cost metric was 100%, while last year’s level was 98%.   

Deutsche Bank shares have jumped to a level last seen in November 2018 after it was reported that Capital Group, an investment firm, have acquired a 3.1% stake in the troubled bank. The German finance house has posted a series of annual loss in recent years, and last week it revealed a larger-than-expected loss. The bank is carrying out a costly turnaround, but Capital Group clearly see value in the struggling firm.  

US

The mood on Wall Street is a little bullish as the major indices registered fresh intra-day record highs, but equity benchmarks are off the highs of the session. The tariff story out of China helped lift sentiment at the start of trading but the positive move lost a little steam. Some dealers pointed out that last month China and the US agreed to enhance their trading relationship when the signed up to the first phase of the trade deal, so the announcement from Beijing isn’t totally out of the blue.  

The jobless claims rate dropped to 202,000 while the previous reading was revised up to 217,000 from 216,000. The ADP employment reading was a very impressive 291,000, so the non-farm payroll update tomorrow will be in focus.

Twitter shares have rallied today on the back of the strong user figures. Monetizable daily active users jumped by 21% to 152 million, ahead of the 147.5 million forecast. It was the fastest quarterly growth the company experienced. Revenue for the three month period topped $1 billion. The company appears to be finally getting a handle on being able to turn client activity into money, which his exactly what is needs to doing. Active users are all well and good but the social media giant needs to be coveting that into cash. 

FX

The US dollar index has hit its highest level since late November. The bullish run in the greenback has been heled by the stellar ADP employment report yesterday, and the respectable jobless claims report today helped too. Seeing as the Fed cut rates three times last year, it would seem they are unlikely to cut rates again in the near-term, hence why it is pushing higher against GBP/USD as well as EUR/USD. This morning Germany posted dreadful factory order figures as the reading showed a 2.1% drop in December, while economist were expecting 0.6% growth.

Commodities

Gold is creeping higher as the metal recoups some of the ground that was lost earlier in the week. The volatility in stock markets this week has influenced gold as the swing to risk-on attitude on Monday hit the metal hard. The commodity has gained ground in the past two sessions which is impressive seeing as the greenback is stronger – this highlights the strength of the asset.    

WTI plus Brent crude are in the red even though the Joint Technical Committee (JTC) has proposed that OPEC+ should cut production by 600,000 barrel per day. Russia are not keen to press ahead with the cuts, which is factor behind the drop in the energy, as the major oil producers are not all on the same page.       

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