Stocks are mixed going into the close as trade tension between the US and China are at the forefront of traders’ minds.
Europe
The G20 meeting begins tomorrow, and on Saturday, Donald Trump will meet with Xi Jinping, and that will be closely watched by traders. There was talk that both sides had agreed a ‘truce’ in terms of the trade spat on the run up to the meeting. The US have concerns in relation to national security about the Chinese tech firm Huawei. It was reported that some Huawei employers worked on Chinese military projects, but the tech group denied there is cooperation with the armed forces. US negotiators are likely to be even more sceptical of China in light of the news.
Serco shares hit a 16 month high today after the company issued an upbeat outlook. The group said it expects full-year revenue to be at the upper end of its previous forecast, which was between £2.9 billion and £3 million, and the profit guidance was maintained. The group stopped paying a dividend in 2014, and the company has undergone restructuring since then, and today it said it would consider reinstating the dividend, depending on how 2019 goes in terms of performance.
Greene King issued a positive set of full-year numbers, and the stock has risen on the back of the announcement. Adjusted pre-tax profit rose by 1.6% to £246.9 million, and the consensus estimate was £243.9 million. On a like-for-like basis, sales increased by 2.9%. Like others in its industry, the firm cautioned that a fragile consumer climate and uncertainty surrounding Brexit is likely to hang over the sector.
Bayer has beefed up its legal team in relation to the Glyphosate situation. The pharmaceutical giant hired an external lawyer to fight the legal battle that it is facing in relation to the lawsuits that are linked to the weed killer, Roundup.
US
Equity are largely positive as dealers await the G20 meeting. The final reading of the US GDP for the first-quarter held steady at 3.1%, which wasn’t a surprise. The jobless rate jumped by 10,000 to 227,000, which exceeded the forecast of 220,000. Some traders might view this as a sign that the US labour market is a little weaker, but keep in mind the reading of 192,000 in April was the lowest since 1969. The US economy is still in good shape, and some traders are getting ahead of themselves in terms of possible interest rate cuts from the Federal Reserve.
Boeing shares are in the red after the company discovered a new flaw in the 737 Max jet. The software issue is unconnected to the stall prevention system that the aircraft manufacturer was rectifying.
KB Home shares are higher this afternoon after the group announced solid quarterly figures last night after the closing bell. On a year-on-year basis, second-quarter homes built ticked up by 2% to 2,768, which exceeded the consensus estimate of 2,468. It is worth noting that the average selling price actually dropped by 8%, and that could be an indication the boom times in the housing market are over for now. The new order book rose by 13%, but that might be on account of lower prices.
Walgreens posted solid third-quarter earnings. Adjusted EPS was $1.47, which topped the $1.43 forecast. Revenue for the period was $34.59, and the consensus estimate was $34.46. The company cautioned that pharmacy margin are under pressure, but at the same time it maintained its full-year forecast.
FX
Bitcoin has sold-off sharply today as profit taking set in. The cryptocurrency has soared 182% since the beginning of April, and even though the mood is bearish today, the wider outlook is likely to stay bullish if it can hold above the $10,000 mark.
EUR/USD is a little lower today as the eurozone posted some disappointing data, and the slight increase in the greenback has added to the single currency’s woes. The Spanish CPI rate dropped to 0.6%, from 0.9%, and Italian consumer confidence slipped from 101.9 to 100.8. The German CPI rate held steady at 1.3%, but it remains at a weak level.
GBP/USD has had an uneventful day. Potential UK Prime Minister, Boris Johnson, said the possibility of a no-deal Brexit is a ‘million-to-one’ chance. Sterling’s volatility is likely to remain low until the Conservative Party leadership is wrapped up.
Commodities
Gold’s decline continues as dealers trim their long positions after the metal reached a six year high during the week. A large portion of gold’s rally in June as based on the perception the Federal Reserve would lower rates aggressively later this year, but comments from Fed members, James Bullard and Jerome Powell, have tempered views a little. Should the metal drift lower from here, it might find support in the $1,382 region.
The oil market is subdued today in the wake of the huge rally yesterday on account of the severe drop in US oil stockpiles. Like with equities, the energy market is lacklustre as traders are looking ahead to the G20 meeting.
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