The lingering trade tensions between the US and China has led to a subdued trading session in Europe today.

Europe

President Trump and China’s Xi Jinping are tipped to meet at the G20 summit later this month, and Mr Trump has threatened to raise tariffs on China if Xi Jinping doesn’t show up at the event. While trade tensions simmer away, and dealers await the meeting, we might see a dip in volatility.  

Ferguson shares were today after it was confirmed that Trian Fund Management has acquired a 5.98% stake in the company. The investment group is controlled by Nelson Peltz, who has a history of building stakes in companies that he feels are undervalued. Mr Peltz is no stranger to making his voice heard, and it won’t be a surprise if he starts making recommendations to the board about the group’s strategy. 

Tesco had mediocre start to the year as UK like-for-like (LFL) sales increased by 0.4%, while some analysts were expecting 0.8%,  but it is worth remembering it has been 14 consecutive quarters of growth. The final quarter of UK LFL sales jumped by 1.7%, and the supermarket underwent a slowdown at the start of this year. The retailer’s UK business has greatly improved in recent years thanks to the restructuring under the leadership of Dave Lewis, and it confirmed that the turnaround in Central Europe is ‘on track’.   

Morrisons confirmed they are expanding their same-day delivery service with Amazon, and it will now include Newcastle, Glasgow, Liverpool, Sheffield and Portsmouth. The well-established supermarkets have come under attack from Lidl and Aldi in terms of pricing, and the old guard has had to adjust to the new environment, and the drive to improve the customer experience has been ramped up. Morrisons are broadening their delivery service in a bid to draw in more customers.

Just Group shares surged today after the company said it is keen to become capital self-sufficient by 2022. The chairman said the firm is focused on maximizing shareholder value with no options excluded. Changes in mortgage regulations require companies to hold more cash, and in turn Just Group halted its dividend and did a cash call – which rocked the share price, but now the commitment from the firm to become more efficient has helped investor sentiment.        

US

Stocks are subdued as dealers remain a little cautious about the state of US-China trading relations. The absence of new tough rhetoric has left shares directionless, but there is a little nervousness doing the rounds too.    

The jobless claims report came in at 222,000 which was slightly higher than the 216,000 that economists were expecting, and the previous reading of 218,000, was revised higher to 219,000. The announcement didn’t cause much of a stir given that the labour market is so strong. Monthly import and exports prices dropped by 0.3% and 0.2% respectively. The slip in prices could be a sign that demand at home and abroad is falling. In light of all the talk about the Fed potentially cutting rates later this year, even slightly negative economic reports could be viewed as a sign the US central bank is more likely to loosen monetary policy.   

Lululemon shares are in demand after the company posted strong first-quarter results. EPS soared to 74 cents, and it topped the 70 cents forecast. Revenue came in at $782 million, which exceeded the $755 million estimate. Same-store-sale jumped by an impressive 16%, and analysts were expecting a rise of 11.6%. Not only did the company post a solid set of first-quarter figures, it also raised the full-year guidance. It now anticipates annual EPS to be between $4.51 and $4.58, while the previous guidance was $4.48-$4.55.

Oxford Industries posted first-quarter EPS of $1.30, while the consensus estimate was $1.21. Revenue for the three month period increased by 3% to $282 million, and dealers were expecting $277.3 million, and same-store-sales edged up by 3%. The stock rallied on the back of the numbers.

FX

EUR/CHF is slightly lower on the session after the Swiss National Bank (SNB) kept interest rates on hold at -0.75%, meeting forecasts. The Swiss franc has been in demand in recent weeks as some investors have been seeking out assets that are perceived to be lower risk. The SNB said they would intervene if the franc becomes too strong. Eurozone industrial production dropped by 0.5% on a monthly basis, meeting forecasts. 

GBP/USD hasn’t moved much today even though the Conservative Party leadership race has stepped up a notch, and Boris Johnson is in the lead. Mr Johnson backed the ‘Leave’ side in the referendum, but recently stated that leaving the bloc without a deal would only be a ‘last resort’.    

Commodities

WTI and Brent crude have surged today on the back of the news that oil tankers was attacked off the coast of Iran. Tension between the US and Iran have been high recently, and now there are logistical concerns in the Gulf of Oman – a busy oil shipping region.

Gold is marginally higher today as the recent bullish move continues. The metal has enjoyed a major rally in recent weeks and in light of Monday’s pullback, it now might look to retest the recent highs. A sizeable break below the $1,320 mark might pave the way for $1,300 to be tested.                     

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