Stock markets in Europe are set to finish firmly in the red as political tensions linger. Investors are still worried about the US-China trade spat. The euphoria that was experienced during the week on the deferral of higher tariffs on Chinese imports into the US, has been replaced by impatience about the lack of clarity over trading relations. President Trump met with North Korea’s Kim Jong-un today. Mr Trump would like it if North Korea abandoned its nuclear ambitions, and the relationship between the two politicians has improved in the past year.  

Europe

Metro Bank shares fell to a record low after the bank announced it plans to raise £350 million from a cash call in order to beef up its cash position, after an accounting error revealed that the bank underestimated its loan exposure. To make matters worse, the finance house will be investigated by the regulators because of the accounting error.

Marks & Spencer will pay £750 million to Ocado for a 50% stake in the joint venture. M&S intend to raise up to £600 million from a rights issue, and cut their dividend in order to fund the investment. From September 2020, Ocado’s website will no longer offer Waitrose products. The move should give M&S exposure to online sales, and the cash raised by Ocado will be ploughed into their infrastructure. The deal should benefit both parties as M&S need to play catch-up in the area of online sales, and Ocado need additional investment funds to ensure their operation can cope with all their new contracts.

Ted Baker shares sold-off this morning after the company issued a profit warning. The fashion house announced that it expects full-year pre-tax profit to be roughly £63 million, while analyst were predicting £74 million. The company cited an unexpected inventory write-down, adverse foreign exchange movements and extra product cost for the lowering of the guidance.

Rio Tinto reported solid full-year figures today. Underlying earnings edged up 2% to $8.81 billion, topping the forecast of $8.47 billion. The company continues to dispose of assets, and $8.6 billion was raised from asset sales, and that helped fund with the generous pay outs to shareholders. The final dividend was $1.80, and a special dividend of $2.43 will declared too. The company has learned from the mistake of the mining boom, when it over borrowed and over bought, and now its strategy is to focus on ‘value over volume’. The stock has been pushing higher since December, and a break above 4,540p, might bring the 4,700p region into play.

US

US stock markets are a little lower after Robert Lightizer, trade representative, suggested that a trade deal with China isn’t a done deal just yet, and he added that a deal won’t be reached just by China agreeing to purchase more US goods. The trade representative claimed it would be a ‘long process’ to enforce a deal, should it be agreed upon.

Lowes confirmed that fourth-qaurter same-store-sales increased by 1.7%, but analysts were expecting 2.03%. Net sales for the final qaurter ticked up by 1% to $15.65 billion, but the consensus estimate was $15.74 billion. On the plus side, EPS for the three month period was 80 cents, which narrowly exceeded the 79 cents that traders were expecting. The group continues to perform well in the US, but it foresees continued weakness in the Canadian market in the near-term. 

The good trade deficit widened by 12.8% to $79.5 billion. Exports dropped by 2.8%, while imports jumped by 2.4%. 

FX

GBP/USD hit a seven-month high as sentiment surrounding Brexit continues to improve. Traders believe there is an increased possibility that Brexit will be delayed, and it was reported that a pro-Brexit group within the Conservative Party are after softening their stance in relation to Mrs May’s withdrawal agreement.

Sticking with the sterling theme. EUR/GBP has fallen to a level not seen since May 2017. It has been another quiet day in the eurozone. Consumer confidence in the currency bloc remained at -7.4 in February, meeting forecasts, and it underlines the cautious sentiment in the area.

Commodities

Gold is largely unchanged on the day as there has been little movement in the US dollar. The metal and the greenback have enjoyed an inverse relationship for most of the last year, and the lack of volatility in the US dollar has spilled over into gold. If the metal can hold above the $1,320 mark, it might test the 1,366 area.

Oil surged after the Energy Information Administration report showed that oil stockpiles dropped by 8.64 million barrels, while traders were expecting a build of 2.84 million barrels. Gasoline stockpiles declined too.

 

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