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Equities higher over US-China hopes, Ryanair handles turbulence well

Stocks have rallied as there is talk the US are contemplating softening their position in relation to tariffs on Chinese goods. 

Nothing has been confirmed, but Steven Mnuchin, US Treasury Secretary, put forward the idea of lifting some or all of the tariffs, while Robert Lighthizer, US Trade Representative opposes the idea. The fact that Mr Mnuchin is considering softening his stance indicates his is willing to compromise, and that has lifted sentiment.  

Ryanair shares are in the red this morning after the airline warned that full-year profit would be in the range of between of between €1 billion and €1.1 billion, excluding the Lauda unit, while the previous guidance was between €1.1 billion and €1.2 billion. The company cited tougher competition from the likes of Wizz Air, and deeper discounting on fares from the lowering of the guidance. The airline warned on profits in October and traders are mindful of that given today’s news. The stock has been in decline recently, and while it holds below the 1,000p mark, its outlook should remain bearish, and support might be found in the 900p region.

Rio Tinto confirmed that iron ore production increased by 2% last year, in-line with forecasts, and the company expects it to increase this year too. The iron ore division is a major part of the company’s overall businesses, so a healthy outlook bodes well for investors. Aluminium production slipped by 3%, while copper output jumped by 33%.

Sophos shares slumped after the group issued a trading update. The group has had a respectable start to the year as billing for the first nine months grew by 2% year-to-date. The firm cautioned that trading is expected to be subdued, and it foresees a modest decline in full-year billing. The group has suffered a couple of severe sell-offs in the past six months as a slowdown in sales, and a failure to reiterate targets has rocked investor confidence. The stock has been in a decline for months, and if the bearish move continues it might target the 250p region. 

UK retail sales in December dropped by 0.9%, which was slightly worse than the 0.8% decline that economists were expecting. Adding to that, the November report was revised to 1.3% from 1.4%. GBP/USD didn’t move much on the back of the update, but the currency pair has retreated from yesterday’s two-month high.   

Netflix will be in focus after the company announced its latest quarterly figures. The update was a mixed bag. Earnings per share were 30 cents, which topped the 24 cents forecast. Revenue was $4.19 billion, while equity analysts were expecting $4.21 billion.  In the US, the group added 1.53 million new subscribers, slightly ahead of estimates, while 7.31 million subscribers were added, easily topping the 6.14 million forecast.

We are expecting the Dow Jones to open 70 points higher at 24,450 and we are calling the S&P 500 up 8 points at 2,643.      


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