Equity markets are in positive territory as it was reported that the US might not impose a 20% tariff on EU cars. 

Europe

This was met with a positive reaction, and it was reported that Angela Merkel might give her support to lower the EU’s tariff on US cars. Traders welcomed the news as it suggests the trade talks are moving in the right direction. 

Superdry shares are higher today after the clothing retailer announced impressive full-year results. Underlying pre-tax profit increased by 11.5%, and revenue rose by 16%. The dividend was lifted by 11.4% to 31.2p, and a special dividend of 25p was revealed too. The firm decided to reward shareholders with a special dividend on account of the double-digit profit and revenue growth, and it boosted investor confidence. The firm aims to spend between £50 and £60 million on capital investment, and the funds will be used to improve infrastructure and technology.

Associated British Foods shares are in the red as the sugar division continues to weigh on the group. Weak EU sugar prices were cited for the 17% drop in revenue at the sugar division. Primark posted a 6% rise in nine month like-for-like (LFL) same-store sales. It is impressive that Primark is achieving LFL sales growth given the dire state of UK retail sector. It is worth noting that the LFL sales growth rate in the first half was below that of the same period last year. The stock has been in a downtrend since October 2017, and if the bearish move continues it could target 2,336p.

Persimmon shares have fallen on the back of a slowdown in sales growth. First-half revenue increased by 5%, while the homebuilder saw an 8% jump in revenue in the same period last year. The company confirmed that cost-cutting should help underlying operating margin. Nationwide stated that UK house prices grew at their slowest pace in five years in June, and this is playing on investors’ minds too. 

US

US stocks are higher even though we are one day away from Washington DC and Beijing slapping tariffs on each other’s imports. Traders are relatively optimistic on stocks as there is a feeling that the Chinese economy will come off worse in the trade spat.  

The US revealed some mixed employment data. The ADP employment report showed that 177,000 jobs were added in June, while the consensus estimate was 190,000. The May report was revised to 189,000 from 178,000. The jobless claims report came in at 231,000, while economists were anticipating 225,000. These reports have set the tone for the non-farm payrolls report tomorrow. 

At 7pm (UK time) the Federal Reserve will release the minutes from last month’s meeting, where interest rates were hiked by 0.25%. There were suggestions the US central bank could hike interest rates twice more this year. The update was upbeat, but Jerome Powell, the Fed chief, expressed concern over the state of global trading relations. Traders will be trying to glean how many more interest rate hikes the US are planning this year.

FX

GBP/USD received a boost earlier in the session from Mark Carney, the governor of the Bank of England. The central banker confirmed he has ‘greater confidence’ in the recent economic data, and he feels the soft performance in the first quarter was ‘largely due to the weather’. Mr Carney revealed that the UK economy is growing in line with the May inflation report expectations. The positive move in the pound was short lived, and while it remains below 1.3315, its outlook could remain negative. 

EUR/USD was boosted by stronger-than-expected German manufacturing orders. The May report jumped by 2.6%, which easily topped the 1.1% increase economists were expecting. The April report was revised from a 2.5% drop to a decline of 1.6%. The single currency has been pushing higher recently, and if the positive move continues, it could target the 1.1850 area.

Commodities

Gold has drifted lower ahead of the Fed minutes later today. Some traders feel the US central bank will hike rates two more times in 2018, and for that reason gold could remain under pressure in the run up to the announcement. The metal has been in a downtrend since April, and if the negative move continues it could target $1,236.

WTI and Brent Crude oil came under pressure after the Energy Information Administration report showed an unexpected jump in US oil inventories. The report showed a build in stockpiles of 1.24 million barrels, while the consensus estimate was for a drop of 3.46 million barrels. 

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