Stocks are set to finish higher today as the tit-for-tat tariff attacks that we saw between the US and China yesterday weren’t as harsh as some dealers were expecting. 

Europe

Now that Washington DC and Beijing have stepped up their tactics, there is a feeling in the markets that a weight has been lifted as we have gotten over a hump. The trade dispute may have taken a turn for the worse, but traders aren’t expecting another escalation in the near-term.   

Kingfisher shares are in the red after the company revealed a 14.7% fall in first-half pre-tax profits. It’s the same old story, the French division continues to weigh on the overall group. The UK and Polish operations performed well, and helped off-set the underperformance in France. Gross margin fell by 40 basis points due to stock inefficacy and logistics, largely in France. The company has improved prices and communication with customers in France, and this could lead to improved trading in the second-half. The company is half way through its five-year turnaround plan, but given the struggling French unit, it may not achieve its target. The stock has been pushing lower for nearly two years and if the bearish move continues it could target the 235p region.

Stagecoach said it had a ‘good’ start to the year. On a like-for-like basis, the regional bus department saw sales grow by 3.2% in the 16 weeks until mid-August. The increase in rail replacement bus services helped lift revenue in the period. The group lost a number of contracts with Transport for London last year and that played a role in the 2.2% decline in London bus revenue at the start of the year. The company’s rail divisions saw solid single digit growth but the North American unit registered a small decline in sales. Stagecoach confirmed that its full-year earnings should be largely unchanged from last year.

US

Equities are mixed this afternoon as traders are cautiously optimistic about the state of global trading relationships. The US-China trade spat reached a new level yesterday, but there is a sense that things could simmer down in the near-term, now that both sides have announced fresh tariffs on each other.

Tesla shares are a little higher today after the company recouped some of yesterday’s lost ground. The US Justice Department is investigating Elon Musk’s tweet about taking the company private last month. It was reported that the Securities and Exchange Commission are gathering information about the rationale behind the tweet too.

In the second-quarter the current account deficit fell to $101.5 billion from the revised deficit of $124.1 billion. President Trump will view this is a step in the right direction, but the huge deficit adds weight to the argument that the US needs to rebalance its relationship with its trading partners.  The trade standoff with China has become more entrenched in the past 48 hours and while the US nurses a large trade deficit, Mr Trump is likely to stick to his guns.

FX

GBP/USD had a volatile session to say the least. The UK inflation rate jumped to 2.7%, up from 2.5%, and the core inflation rate rose to 2.1%, up from 1.9%. The announcements pushed the pound to its highest level versus the US dollar since late July. The respectable increase in demand highlights how robust the UK economy actually is. The political situation is a different story. Prime Minister May is said to have rejected the improved Brexit offer from Michel Barnier – the EU’s chief negotiator. This news sent the pound tumbling. The British economy is ticking along nicely, but the political uncertainty is holding the pound back.

EUR/USD is largely unchanged today. It wasn’t the most exciting day in terms of economic indicators. The eurozone’s current account surplus rose to €31.9 billion, up from €29.8 billion in June. The announcement had little impact on the euro, but the large trade surplus the EU has with the US highlights the trading imbalance between the two, and this is likely to weigh on President Trump’s mind. 

Commodities

Gold continues to dance around the $1,200 mark and the lack of volatility in the US dollar has translated into a small trading range for gold. The commodity has been in a downward trend since April and while it remains below the 50-day moving average at $1,208, its outlook could remain negative.

WTI and Brent crude oil were jolted higher after the Energy Information Administration released data showing that US oil and gasoline inventories fell. Oil stockpiles declined by 2.05 million barrels, while the consensus estimate was for a 2.74 million barrel drop. Gasoline inventories dropped by 1.71 million barrels, which was much larger than the 104,000 barrel fall that traders were expecting.

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