market relief

Equity markets are off the highs of the session but are still firmly in positive territory as dealers are optimistic about the latest round of US-China trade talks. 

Europe

Representatives from both sides are set to meet in Beijing this week, and investors are a little on the optimistic side. The talks that have taken place so far haven’t managed to bridge the divide, but traders are still hopeful nonetheless. 

Acacia Mining revealed annual net earnings of $59 million, and that compared with a loss of $707 million in the previous year. Production costs and total output costs topped forecasts. The company said capital expenditure will drop between 8.6% and 19.3% this year, and no dividend was paid out in the year just gone. It is encouraging that the firm swung to profit, but if they are not paying a dividend, it suggests they are a bit fragile. In recent months, the stock has struggled to crack the 200p mark, and a break above that metric might pave the way for further gains.

There is still talk that Smith & Nephew are looking into acquiring NuVasive for $3 billion. The London listed company is lower today as the stock handed back some of the ground it made at the back end of last week. 

It was reported over the weekend that Virgin Media are considering making a bid for KCOM. Virgin Media is controlled by Liberty Global who have been investing heavily in the fibre optic sector, and this could be a continuation of their expansion. 

Talktalk shares are lower after HSBC downgraded the stock to reduce from hold, and the cut the price target to 82p, from 115p.

Lloyds have been upgraded to overweight from equal-weight by Morgan Stanley, and the US investment bank lowered its outlook for RBS to equal-weight from overweight.

US

Equity markets are a little higher today as dealers are hopeful the US-China trade talks this week will be a success. The optimism is baseless, as we have haven’t heard anything about the state of US-China trade relations recently, but dealers are viewing the fact that they are taking place as a positive sign.

Restaurant Brands International shares hit a 14 month high after the group posted solid numbers. Fourth-quarter adjusted EPS were 68 cents, which narrowly topped the 67 cents that analysts were forecasting.  Same-store sales and revenue exceeded forecasts too. The stock gapped higher today, and has been rebounding since late December, and if the bullish move continues it might target the $70.00 region.

Tesla announced that it has cut 150 of the 230 jobs at the Las Vegas facility. The division deliveries vehicles to clients in North America, and the company cautioned that the delivery rate will decline. The stock is a little higher today.

FX

GBP/USD has been hit by the broad push higher in the US dollar, and the disappointing economic updates from the UK added to the pounds woes. Last year, the UK economy grew by 1.4% - its lowest growth rate since 2012. Adding to that, UK industrial output, manufacturing output and construction output all showed negative growth in December. Sterling has been slipping since late January, and if the negative move continues it might target the 1.2815 area.   

EUR/USD has also been driven lower by the firmer US dollar. It was been a quiet day in terms of economic announcements from the eurozone, and that is why volatility has been low.  Later this week the eurozone will release the flash GDP forecast for the fourth-quarter of 2018, and that will be closely watched. Keep in mind, the Italian economy is in recession, and France and Germany are slowing too, so investors will be half-expecting a soft reading. 

Commodities

Gold is a little lower on account of the stronger US dollar. The commodity and the greenback continue to have a strong inverse relationship. Gold has been in a solid upward trend since mid-November, and if it holds above $1,298, it might target the $1,335 area.

Oil is in the red today as Friday’s Baker Hughes report showed there was an increase of seven active rigs in the US. The energy market seems less optimistic about the US-China trade talks. Oil has bounced back since December, but unlike the equity market, it has run out of steam recently.

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