It has been a rough week for European stock markets as trade tensions have dogged investor confidence, but major indices are set to finish higher today, albeit lower on the week, as the general mood has slowly improved.

Europe

Huawei is at the centre of the trade storm, but President Trump believes a deal can be done that includes tough restrictions on the Chinese tech giant. The ball is in Beijing’s court, and unless they are willing to bend, we could be in for protracted trade spat.

Royal Mail shares were given a boost today after Goldman Sachs upgraded their outlook for the stock from neutral to buy. On Tuesday, the delivery company slashed its dividend by 40% in order to fund its turnaround process, and the stock dropped to all-time lows yesterday. In late 2015 and early 2016, we saw something similar with the mining sector, and in those cases, many big bank were too quick to issue positive outlooks. With a greatly reduced dividend, potential investors are less incentivised to buy the stock, but should the turnaround scheme bear fruits, we should see investor sentiment turnaround too.

Old Mutual have confirmed that the CEO, Peter Moyo, has been suspended as there was a ‘material breakdown in trust’ with the board of directors. The COO, Iain Williamson, will carry out the top job. The stock price is lower on the back of the announcement as a lack of trust with the board, equates to a lack of trust investors too. Seeing as Mr Williamson has taken the helm, it should offer stability.

Tarsus shares surged after the company agreed to be bought-out by Tiger Acquisitions, which is a part of Charterhouse Capital Partners private equity firm. The share price has essentially jumped to a few pennies above the takeover price of 425p.

US

The NASDAQ 100 is underperforming the S&P 500, which is a little concerning seeing as tech-focused index has suffered the most in the Huawei-related sell-off, it might be an indication that confidence is still lacking in the technology sector. 

US durable goods dropped by 2.1% in April, and the consensus estimate was for a 2% fall. To make matters worse, the March number was revised considerably lower to 1.7% from 2.6%. This suggests that demand is cooling, and keep in mind yesterday’s manufacturing and services PMI reports showed slowing growth. The recent economic updates might prompt Mr Trump to dial down the rhetoric with China.

Footlocker posted disappointing figures as EPS came in $1.53, while the consensus was $1.60. The same-store-sales growth was 4.6%, undershooting the 5.1% forecast. Revenue for the period was $2.08 billion, which was shy of the $2.11 billion forecast. On the bright side, the company maintained its same-store-sales guidance, and gross margin projection, but that wasn’t enough to keep investors happy, as the stock declined.

Sticking with the retail sector, Hibbett Sports had a stellar quarter. EPS was $1.61, which smashed the $1.32 forecast, same-store-sales was 5.1%, which hammed the $1.6% estimate. Net sales for the quarter jumped by 25% to $343.3 million, exceeding the forecast of $326 million. Not only did the group knock it out of the park in term of the figures, it issued a respectable outlook too, as it foresees comparable sales in 2020 growing by between 0.5% and 2%, and keep in mind some retailers have been cutting their forecasts. The impressive update sent the shares soaring.

FX

GBP/USD had a volatile session after Theresa May announced her intention to step down on 7 June. There was increased chatter about the Prime Minster stepping down this week and now that it’s out in the open, traders will be keeping an eye on the political scene to try and ascertain who is likely to take the top job. The pound has managed to recoup some of the ground it lost in recent weeks, this could be the calm before the next Brexit-related storm.

EUR/USD has been given a slight lift on account of the dip in the greenback. Traders are mindful the single currency touched a two-year low yesterday, but it quickly rebounded, and there appears to be firm support in the 1.1110 region.

Commodities

Gold has handed back some of the gains it made yesterday. Traders risk-on attitudes today has led to a rebound in stocks, and a drop in assets that are perceived to be safe haven plays like gold have suffered. The metal has been in decline since February, and while it holds below $1,300, its outlook should remain negative.

Oil has rebound in the wake of yesterday’s severe sell-off. The energy is licking its wounds today as the commodity is on track to post its biggest weekly loss of 2019. Trade tensions might have cooled a little today, but until relations are restored, oil is likely to struggle to retest the April highs. 

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