Heightened trade tensions between the US and China has weighed on investor confidence today. Beijing and Washington DC are squaring off, and the relationship between the two is deteriorating.

Europe

The DAX is firmly in the red as Angela Merkel, the German chancellor, is at loggerheads with the interior minister, Horst Seehofer. The two politicians are arguing over migration and border control. Some political analysts are warning the issue could bring about Merkel’s downfall, and investors are dumping German stocks.

DS Smith shares are lower today despite the company announcing solid first-half figures. Revenue and adjusted profit before tax both jumped by 17%. The group issued a positive statement too, and stated it ‘performed very strongly’ and is confident it can achieve its medium-term targets. Rising paper and acquisitions helped the company bring about higher growth, but it is worth pointing out that costs crept up too. The final divided fell from 10.6p to 9.8p. The stock has been in a strong upward trend since April, and if the positive move continues it could target 600p.

Virgin Money agreed to be acquired by CYBG in a deal that is worth £1.7 billion. The group confirmed the move will provide a ‘broad-based, less concentrated combined mortgage and unsecured lending portfolio’. The retail banking business is tough, and the two combined groups will act as a challenger bank to the big four banks RBS, Barclays, Lloyds and HSBC. The new group will have an uphill battle on their hands as the major players have bigger budgets to spend on technology. The banking sector is moving away from the high-street and becoming online focused, and that is what that new group will have to focus on.

There is now talk that Opec will increase output by 300,000-600,000 barrels per day (bpd). Before today, traders were speculating the group of oil producers would boost output by 1 million bpd, and the oil market has jumped. Shares in BP and Royal Dutch Shell are now in positive territory on the back of the jump in oil.

Rupert Stadler, CEO of Audi, has been arrested as part of the allegation that Volkswagen Group cheated in relation to the diesel emissions scandal. The announcement has shaken investor confidence in German car makers Volkswagen, BMW and Daimler

US

Trade tensions are running high as the US and China are engaging in tit-for-tat tariff attacks. We are edging closer to a trade war between the two largest economies in the world and dealers are cutting their long positions in equities. Beijing are targeting the US’s agricultural and car making sectors for political reasons, as they know it would hurt President Trump’s voting base.

In financial terms, the size of the tariffs aren’t enormous, but a clear message is being sent, and investors don’t like the way things are heading. Both administrations are showing no signs of letting up, and traders are trimming their equity portfolios.

The National Association of Home Builders index in June slipped to 68, from 70 in May, and the consensus estimate was for 70. The activity rate has been broadly slipping since December, when it hit its highest in over a decade.

FX

GBP/USD is lower after the UK revealed house price data which pointed to a cooling of prices. According to Rightmove, average asking prices grew by 0.4% in June, while it grew by 0.8% in May. These figures were mildly concerning for dealers, and the pound has come under pressure on the back of it.

EUR/USD has crept higher today as bargain hunters move in. The single currency took a hammering on Thursday, and dealers are keen to snap it up today. While it remains below 1.1851, its outlook will be negative.

Commodities

Gold hasn’t moved much today. The metal hit a six-month low on Friday and has barley recovered from the decline. It is worrying for gold that it can’t seem to move higher on a day when equities are under pressure. Gold has been in a downward trend since early April and if the negative move continues it could target $1,270.

WTI and Brent Crude oil are higher today as there is no speculation that Opec will look to increase output by 300,000-600,000 bpd. Traders were initially talking about output being boosted by 1 million bpd, and this has fuelled the buying. 

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