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Fear factor fades and stocks jump, Lyft lifts outlook

European stock markets are higher heading into the close as the fear surrounding the US-China trade dispute has faded a little. 


The fact the Chinese central bank fixed the yuan at a lower rate than expected gave the markets some respite. Chinese exports and imports in July both came in better than expected, and that added to the feel-good factor. The trade spat is far from over, but while the rhetoric and the actions have been dialled down, traders are swooping in snapping up relatively cheap stocks.       

Cineworld shares are in the red today after the group announced a mediocre set of first-half figures. On a pro-forma yearly basis, admissions dropped by 14.4%, and revenue slipped by 11.1%. The group cited the poor timing of film releases for the disappointing numbers, but it is worth noting that consumer confidence in the UK is weak, and in the US there is a fear it will soften. The group paid down $570 million of debt, but debt levels remain high in the wake of the takeover of Regal. Cost savings of $150 million were achieved, and the group is looking for further cost saving opportunities. Cineworld is taking the rights steps to tighten its belt in the wake of the acquisition, but falling admissions is worrying.

Aviva confirmed that first-half operating profit was fractionally higher. Pre-tax profit surged by 374%, and that was on account of a record investment income gain. The group’s life business, which is its core unit, posted a 7.9% drop in operating profit, but consumer levels of activity were described as ‘solid’. The firm is keen to ramp up its business in Asia, and is evaluating a range of options’ to improve profitability.      

It was reported yesterday that Citadel Group have acquired a 1% increase in Aston Martin. The move comes after last month’s news that the high-end car maker reduced its sales guidance, and that sent the stock price tumbling. There is a lot of chatter about a global economic slowdown, but luxury brands tend to weather the storm better, so the near all-time low share price might attract more investors.    


The mood is also lighter on Wall Street as the major indices are higher this afternoon, and US government bond yields rebounded. There seems to be a ceasefire between the US and China when it comes to trade, but the fact remains that the People’s Bank of China fixed the yuan fractionally above the 7 mark against the dollar ,and the speaks volumes as Beijing have made it clear that the yuan is a tool that can be deployed, if needed.

The jobless claims reading was 209,000, which was an improvement on last week’s reading of 215,000. When you take into account the latest JOLTS and non-farm payrolls update, it is clear, the jobs market is in rude health. 

Kraft shares are down this afternoon after the group revealed delayed results. The estimate for the impairments was $1 billion higher than previously predicted, and the group cautioned that figure might change. The rest of the update was mixed, as EPS fell to 78 cents, topping forecasts of 61 cents. Revenue dropped by 16.3% to $5.59 billion, which was just shy of estimates. The stock slumped to an all-time low.  

Lyft shares received a nice lift as the second-quarter revenue was $867.3 million, which was a respectable increase on the first-quarter revenue of $776 million, and that topped the forecast of $800 million. The group now expects full-year revenue of between $3.47 billion and $3.5 billion, and that was an improvement on the previous guidance of $3.27 billion - $3.3 billion. There was a lot of hype surrounding the stock at the IPO, and the even though the first few weeks were tough for the stock, it seems to have found a floor at the $56.30 region.           


It was been a quiet day on the currency markets, and that is in part to the actions of the Chinese central bank. The US dollar index is largely flat on the day, and that reflects the fall-off in fear that has recently gripped the financial markets. Things have calmed down today, but the chatter about additional monetary easing from the Fed is still lingering. There weren’ t any major economic announcements in Europe today, and in turn EUR/USD and GBP/USD traded in tight ranges. 


Gold has cooled a little as a mixture of profit taking and a more risk-on attitude of traders has nudged the metal lower.  Gold has enjoyed a stellar run recently, and that was partially on account of the fear surrounding the US-China trade situation, and today we have seen a slight reversal.

Oil has rebounded after Saudi Arabia has called on other oil producers to try and halt the decline in the energy market. The news isn’t exactly surprising as there is often this chatter whenever the oil market undergoes a sizeable slump. The cooling of tensions between the US and China is also a factor in today’s positive move.  



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