News

Sentiment muted as US-China trade deal on radar, Tesla tops $500

CMC Markets

Equity benchmarks are mixed as we approach the end of the trading session. 

Europe

An absence of major macroeconomic news has brought about an uninspired trading session. This week the US and China are due to sign phase one of the trade deal, and dealers are looking forward to the event. Equity markets have gained major ground in recent months on the back of the trade story, and now it seems that traders are content to sit on the hands until the agreement has been made official. Looking beyond the first phase of the deal, the second-stage is likely to be much harder to broker, so some traders are nervous that tensions could tick-up again. 

Spirent Communications revealed a short and sweet trading update which helped the share price soar. Full-year revenue rose by 5.5%, and the annual operating profit is tipped to be $91-$93 million, and keep in mind the previous guidance was $77.1 million. The stock enjoyed a major rally in the past 12 months, and it achieved an all-time high over one week ago. Should the bullish trend continue, the stock could target the 260p area.

William Hill announced that full-year operating profit will be in the region of £143 million and £148 million – which would top analysts’ forecasts. It would appear the restructuring of the retail business has paid off as unit should produce a profit taht will exceed the previous guidance. Not all the update was positive as the US business is now expected to just breakeven, while the old guidance was for earnings of between $0 and $20 million. The UK gaming sector has become more regulated thanks to the clamp down on fixed odds betting, so a profitable US arm will be needed to make up for the tougher environment in the UK.

Superdry shares are in the red despite the upgade from RBC. The Canadian bank raised their outlook on the fashion house to outperform from sector perform, as well as upping their price target to 500p from 490p. The clothing company issued a profit warning on Friday – which produced major volatility, so it seems that traders are still wary of company.

RBC downgraded Ted Baker to underperform from sector perform. The finance house cut its price target for the stock from 440p to 300p. Ted Baker shares are down over 6%.

US

Volatility on Wall Street is low as the US-China trade story is at the forefront of dealers’ minds. The Dow Jones, S&P 500 and NASDAQ 100 have set numerous record-highs due to the trade story, but now we are seeing some of the bullish sentiment fade. This week we should see the singing of the first phase of the trade agreement between the two largest economies in the world, but once the first leg is official, then the second-leg will be put on agenda.   

Lululemon are bullish as the company expects fourth-quarter EPS to be $2.22-$2.25, while the previous guidance was between $2.10 and $2.13. Keep in mind equity analysts were predicting $2.15. The firm also raised its quarterly revenue forecast to between $1.37 and $1.38, while the last forecast was $1.32 billion - $1.33 billion.  The share price set a fresh record-high today.

Tesla shares topped $500 for the first time. The electric vehicle manufacturer had a good start to 2020, as it produced a record of 112,000 vehicles in the fourth-quarter – topping forecasts. The solid performance in the final three months helped the group achieve the lower-end of the full-year target. Today, Oppenheimer lifted their price target for the stock to $612 from $385, and that assisted the rally.

Beyond Meat shares are back above the $100 mark, and hit their highest level since October.       

FX

GBP/USD is in the red on the back of broadly disappointing economic reports from the UK. It was estimated the UK economy contracted by 0.3% on a monthly basis in November. The consensus estimate was for zero growth. It is worth noting the October report was revised higher to 0.1% from 0.0%. It would appear that a mixture of Brexit as well as general election uncertainty hit the UK economy.

EUR/USD has been given a lift by the broad dip in the greenback. It has been a quiet day in terms of eurozone economic indicators. The German wholesale price index rate on an annual basis improved to -1.3% from -2.5%. It is encouraging to see the reading is improving but it is still weak.        

Commodities

Gold is lower as the metal’s appeal continues to diminish in light of the fading tensions between the US and Iran. Last week the commodity hit a fresh six-year high on account of the US-Iran situation, but now the prospect of an all-out war seems low, so dealers are unwinding their long position in the safe-haven asset. 

Oil is in the red thanks to the de-escalation of tensions surrounding Iran. The update from President Trump last week suggested he wasn’t interested in an all-out conflict with the regime, which brought about a big sell-off in oil. The bearish sentiment is still doing the rounds as supply fears continue to ease.  

 


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