Stock markets in Europe have suffered severe declines as US-China trade tensions have heightened. 

The US already imposes a 10% levy on $200 billion worth of Chinese imports, and there is a fear it will be raised to 25% later this week, and the US has also threatened to impose tariffs on $325 billion worth of Chinese imports. The announcement has rocked investment sentiment, and has prompted traders to dump stocks.

To make matters worse for investors, the EU have lowered their growth outlook for the eurozone, and it now expects 2019 growth to be 1.2%, and the previous forecast was 1.3% ,and the growth forecast for 2020 has been lowered to 1.5% from 1.6%. The timing of the EU’s announcement isn’t great, but global trade tensions are likely to hurt the region. 

BMW shares declined after the company delivered a 78% fall in first-quarter operating profit. Revenue slipped by 1% to €22.4 billion, while the consensus estimate was €22.3 billion. Net income slumped by 74% to €588 million, but it still comfortably topped the €233 million forecast. The luxury car-maker set aside €1.4 billion for a possible fine from the EU in relation to competition laws. BMW stated it now expects margins in 2019 to be between 4.5% and 6.5%, and margins forecasts have been lowered because of the fine provision. On the bright side, the firm still holds its longer term margin forecasts of between 8% and 10%. Much of today’s bad news was already factored in, but the souring of US-China trade relations in the past few days doesn’t bode well for EU carmakers like BMW.

Domino’s Pizza warned that it no longer expects its international business to turn a profit.  The group stated that international first-quarter sales slipped by 2%, while the UK and Ireland operation posted a 4.8% jump in sales. David Wild, the CEO, described the performance at the international business as ‘disappointing’ and warned trading visibility is ‘limited’. The stock has been trending lower for 11 months, and while it holds below the 200-day moving average at 265p, its outlook is likely to remain negative.

Michael Bruce has stepped down as CEO of Purplebricks, and the group’s COO, Vic Darvey has been named as his successor. The company confirmed that it was exiting its Australian operation, and the US business is under review. The firm stated it expanded too quickly, and now it seem as if the firm wants to focus on its successful markets, like the UK and Canada.

US

The mood on Wall Street is downbeat as heightened trade tensions between the US and China has taken hold of traders. For months we been drip feed broadly positive news about the trade talks, and that pushed US indices like the S&P 500 and NASDAQ 100 to record highs, and now the investors are trimming their positions.

Lyft will announce their first-quarter results after the closing bell. Since listing on the stock market, the share price has tumbled as the firm’s losses for last year were well over $1 billion, even though its client base has jumped considerably. Profit margin will be closely watched, and keep in mind it has improved to 26.8% in 2018, from 23.1% in 2017.

Marriott issued disappointing figures, as first-quarter EPS came in at $1.45, while the consensus estimate was $1.64. Revenue for the period was $1.06 billion, which narrowly missed forecasts. On the bright side, the group reiterated its full-year adjusted EPS outlook, and it expects to it to come be in between $7.33 and $7.94. The stock is a little lower this afternoon, but it remains in its wider upward trend, and if it breaks above the $140 mark, it might target the $148 region.

FX

EUR/USD has sold-off in the wake of the EU growth downgrade for the euro-area. The currency markets were experiencing low volatility today, and then the announcement weighed on the single currency. Earlier today, it was reported that German industrial orders expended by 0.6% in March, and keep in mind that economists were expecting an increase of 1.5%

GBP/USD has been as traders seek out the safe haven currencies like the US dollar. There is increasing pressure on Prime Minister May, and there is increasing chatter that the 1922 committee will seek a timetable from Mrs May in relation to her resignation. It was reported that the group would like some ‘clarity’ in relation to how long the Prime Minister intends to stay on if no deal is reached. 

Commodities

Gold has managed to move a little higher despite the firmer US dollar. It would appear that traders are in risk-off mode and that has helped the gold market. The metal is in positive territory today, but the wider negative trend since February, is still in play, and while it holds below $1,300, its outlook should remain negative.  

Oil has sold-off sharply today as US-China trade tensions heat up. China is a major importer of oil, and dealers are dumping the energy as there is a fear that heightened trade tensions will damage demand. The energy reached multi-month highs last month, and now the China-US trade story is acting as an excuse to exit the market.

 

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