The strained trading relations between the US and China have taken a new turn. 

Europe

Beijing has asked the World Trade Organisation (WTO) to impose sanctions on the US, and China are claiming this is in relation to the US’s non-compliance with a ruling from 2013. The move by Beijing could trigger a reaction from President Trump and investors are exiting equities as a result. 

Ashtead share are in demand after the company posted a 22% rise in first-quarter revenue. The British based machinery rental business derives the bulk of its earnings in the US, and the soft pound in recent months has helped the company. The firm’s Sunbelt and Sunbelt Canada businesses saw rental income grow by 19% and 243% respectively, but the Canadian growth was largely driven by acquisitions. It is worth noting that net debt jumped by 18%. The group anticipates full-year results to be ahead of expectations, and the rosy outlook added to the solid figures. The stock has been pushing higher since March, and if the bullish trend continues it could retest the 2,440p region.

JD Sports posted an 18.7% jump in first-half earnings and the firm registered a 3% rise in like-for-like sales for the period. The rise in popularity of ‘athleisure’ – sportswear worn outside of playing sport has helped the company. JD Sports has a large presence in the UK and Ireland, but it is looking to continental Europe, the US and Asia for growth as it doesn’t want to become overly dependent on its main market, and the British high-street is coming under pressure. Even though ecommerce is hurting traditional retailers, JD Sports has reiterated its commitment to physical stores. Their strategy is clearly working but the firm must be flexible as consumer patterns are changing. The stock has been in an upward trend since April, and if the bullish run continues it could target 525p.

US

Stocks are in the red as investors are fearful that President Trump will toughen his stance against China in light of Beijing’s planned request to the WTO. Since the back end of last week traders have been nervous that Mr Trump will up the ante regarding tariffs. Now that China have made the first move, the ball is in Trump’s court, and dealers are expecting some sort of reaction from Washington DC. Given today is the anniversary of the 11 September attacks, it is possible that politics might be put on hold.

Tesla shares are in the red after Nomura cut the stock from buy to neutral and cut the price target from $400 to $300.

FX

GBP/USD had a volatile session today, as UK economic announcements and confirmation that Mark Carney will stay on as the governor of the Bank of England until 2020 pushed the market around.  The pound was helped by the positive UK unemployment and earnings data but the move didn’t last long. The jobless rate remained at 4% - meeting forecasts. Average earnings excluding bonuses ticked up to 2.9% from 2.7%. The British economy is essentially at full-year employment, and it appears that employers are having to offer higher wages in order to attract new staff. If workers are earning more money, they are likely to spend more and therefore keep the economy motoring along.

EUR/USD came under pressure on account of the firmer US dollar. The German ZEW economic sentiment report came in at -10.6 in September, which was an improvement on the -13.7 reading in August. Today’s reading was the best since May, but it is still firmly negative, and it is possible the stalling of the German economy combined with EU-US trade tensions are hurting investment sentiment.  

Commodities

Gold is a little lower on the day and it continues to experience low volatility. The metal has been in a downward trend since April, and given the lacklustre activity in the market recently we still not seeing any signs of a reversal. While the commodity remains below the $1,200 mark its outlook is likely to remain bearish.

WTI and Brent crude oil are higher as traders are getting nervous that oil supplies could fall once the US’s sanctions on Iran are implemented. Dealers are also nervous about Hurricane Florence, which is gathering power and is approaching the Carolinas. The extreme weather may impact the energy markets, and in situations like these, dealers often fear for the worst. Rick Perry, US energy secretary is to meet his Russian counterpart this week. The US would like to keep oil prices a little on the soft side, and Mr Perry may ask Russia to maintain or even output levels. 

 

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