Equity markets in Europe got off to as positive start as the US’s tariffs on China’s imports weren’t as tough as originally predicted. 

Europe

The Trump administration revealed $200 worth of tariffs on Chinse imports, and the levy was set at 10%, and that will rise to 25% in January if the trade dispute is still ongoing. The less aggressive approach from President Trump prompted buying this morning.

This afternoon, Beijing hit back with $60 billion worth of tariffs on US imports, and they will be levied between 5% and 10%. The move from China suggests they are in this for the long-haul. Washington DC are throwing their weight around in term of tariffs, but Beijing could make life difficult for US companies operating in the country. Despite the initial negative reaction to Beijing announcing tariffs, stocks traded higher this afternoon.

Now that traders realise the latest round of tariffs from Mr Trump aren’t as tough as initially predicted, we are seeing a push higher in copper, palladium and platinum. The move higher in the metals has lifted the share price of mining stocks like Glencore,BHP Billiton and Rio Tinto.

Ocado shares are in demand today after the company posted an 11.5% rise in third-quarter revenue, and it was broadly in line with the company’s guidance. Average order per week ticked up by 11.4%, and the average order size held steady. The company accounts for 1.2% of the UK grocery retail sales according to Kantar Worldpanel, but their share is growing. Ocado recently announced a number of high profile joint ventures, but the company didn’t give any details for the time period. Ocado confirmed their third and fourth robotic sites are performing well. Given the stocks’ stellar performance in 2018, the shareholders will want to see healthy returns from its overseas tie-ups. Despite the dip in the share price since July, the stock has been in an upward trend since November 2017, and if the wider bullish move continues it could target the 1,150p region.

IWG shares are lower today after Credit Suisse cut the stock to ‘underperform’. The announcement comes one week after it was reported that Dominik de Daniel, the company’s CFO and COO would be stepping down to ‘pursue other opportunities’. The company had a tough time during the summer as a number of private equity firms expressed interest in the group, but IWG called an end to the talks as they couldn’t agree on a price. 

ITV shares are in the red after Berenberg cuts its price target to 155p, from 185p.

US

Stocks are higher despite the tit-for-tat tariff war between the US and China. The more lenient approach from President Trump last night and a measured reaction from Beijing has left traders a little on the optimistic side. It is almost as if a hurdle has been cleared and investors have one less thing to worry about in the near-term. Apple shares are higher this afternoon as smart watches and other electronics were exempt from the Trump tariffs.  

Last night, Fedex posted a 40% jump in first-quarter earnings per to $3.10, but equity analysts were expecting $3.46. The company brought forward the timing of the $200 million worth of annual pay increases, and that ate into the profit margins.  The company is gearing up for a record Christmas in terms of volumes and has been investing in their networks to improve capacity. The group raised its forecast to full-year EPS between $17.20 to $17.80, and the prior forecast was $17.00 to $17.60. The stock has been pushing higher since June, and if the rally continues it could target the $274.00 region. 

FX

EUR/USD extended its gains thanks to the continued weakness in the US dollar. The greenback has been sliding lately, despite the possibility of a rate hike from the Federal Reserve next week. Italian industrial orders jumped by 2.8% on an annual basis in July, and that was an improvement on the 2% rise in June. The announcement had little impact on the single currency. Traders are more interested in the political situation in Italy. The in-fighting in the Rome administration regarding adhering to EU budget rules could put pressure on the single currency.

GBP/USD has handed back some of the gains it made in recent days. It has been a quiet days in terms of economic indicators from the UK, and volatility has been low. Sterling has been in an upward trend versus the US dollar for one month, and while it holds above the 1.3000 mark, its outlook could be positive.

Commodities

Gold has been nudged higher by the softer US dollar. It’s Groundhog Day for gold as its gets dragged around by the US dollar, and it hangs around the $1,200 mark. The metal has been in a downward trend since April, and while it is below the 50-day moving average at $1,208, its bearish move could continue.

WTI and Brent crude are higher this afternoon after Saudi Arabia revealed they are comfortable with Brent crude oil being above $80 per barrel. Officials from the gulf state claimed they have no desire to ramp up prices, but given they are at maximum capacity in terms of production, it will be difficult for them to keep prices down.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.