Stock markets are broadly positive as investors are a little less fearful about a global trade war.
Europe
Beijing softened its stance overnight, but there was a report recently that they will have a strong countermeasure against the tariffs imposed by the US.
Berkeley Group shares are lower today after the company revealed respectable full-year figures, however the outlook was cautious. The home builder confirmed it plans to make at least £3.375 billion in pre-tax profits between May 2016 and May 2021. The old guidance was £3.3 billion, and the original target was £3 billion. Berkeley Group announced they reached peak profitability, and warned that earnings could slip by 30%. The share price has been broadly pushing higher for two years, and we might see new buyers enter the fold. The stock is in the red, but if it remains above its 200-day moving average at 3,925p it could continue its wider upward move.
Severfield announced a strong set of annual figures, and issued an optimistic outlook. Revenue and underlying profit jumped by 5% and 19% respectively. The total dividend was increased by 13%. The company confirmed it has a solid order book, and it is well positioned to win new contracts. The stock hit a six-month high, and if the bullish move continues it could target 90p.
Ocado shares are in demand this morning after Peel Hunt issued a price target of 1,700p for the stock. The stockbroking firm is taking a 15-year view on the company and they believe Ocado has the potential to become the ‘Microsoft of retail’. Ocado entered the FTSE 100 index on Monday and this gives you an indication of how far the stock has come over the years.
Legal & General announced they anticipate their asset management unit to achieve an 8-10% rise in profit, provided market conditions are normal. The CEO, Nigel Wilson, confirmed the company is in a stronger position due to having a top asset manager in the group. The stock has been broadly in an uptrend since June 2016 and, if the upward move continues, it could target 287p.
Skyshares are higher after Disney upped its offer for Twenty-First Century Fox, and keep in mind that Comcast are also in the process of bidding for most of Fox’s assets – which include a 39% stake in Sky.
US
Stocks got off to positive start as trade tensions between the US and China have cooled a little. The Beijing administration confirmed they would rather resolve this trade dispute with dialogue. The fact that China flinched first is likely to please President Trump as it suggests his hard-line tactics worked. Traders welcomed the softer stance from China and are a little less fearful of a trade war now. It was reported that Beijing will take a strong countermeasure against US levies, but there hasn’t been a major reaction by markets.
Speaking at the European Central Bank (ECB) forum, the Federal Reserve chief, Jerome Powell, announced there is a case for further interest rate hikes. The US central banker pointed out that unemployment is low and is tipped to fall further, and the inflation rate is close to their target. The optimistic outlook from Mr Powell added to the positive sentiment today.
It appears that Twenty-First Century Fox is caught up in the middle of a bidding war as Disney have now bid $71.3 billion for the bulk of their assets. Disney’s previous offer was $52.4 billion, and last week Comcast offered Fox $65 billion for the bulk of their assets.
FX
The US dollar index is a little firmer in light of the comments made by Fed chair Jerome Powell. The US dollar has been strong lately as all the chatter of a trade war has made the greenback more attractive, as protectionist policies can push up inflation.
EUR/USD is weaker despite positive comments from ECB chief Mario Draghi. The central banker believes the inflation rate in the region will move up towards their target. Mr Draghi said the factors holding back wage growth in the bloc are waning.
GBP/USD fell to a fresh seven-month low today as traders await a crucial vote at Westminster regarding Brexit. The pound lost ground against the US dollar as traders are nervous about the vote, which is expected later today. Politicians will be deciding what happens in the event of a no-deal Brexit.
Commodities
Goldis largely unchanged on the day and the metal is experiencing low volatility. Gold fell to a six-month low yesterday and it hasn’t recovered much. Lately the metal has been pushed around by the US dollar, and the two markets have a high negative correlation. While gold remains below $1,300, its outlook might remain negative.
WTI and Brent Crude oil saw a lot of volatility when the Energy Information Administration figures were released. US oil stockpiles fell by 5.9 million barrels and gasoline inventories jumped by 3.27 million barrels. The two-day Opec meeting which starts tomorrow will be closely watched.
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