European stock markets are set to finish higher on the day as trade tensions have dialled down a little. 

Europe

President Trump called off the tariffs on Mexican goods as he feels that Mexico have done enough in terms of border security, and it appears that his threat worked. The US president, claims that Beijing will make a trade deal, because they have to make a deal. The absence of tough trade talk has boosted investor confidence.

Thomas Cook confirmed it was approached by Fosun Tourism, and the Hong Kong listed group are interested in acquiring the company’s tour operating division. The travel sector as a whole has been struggling recently as consumers are holding off on overseas trips as due to Brexit uncertainty. Last month, Thomas Cook posted a first-half loss of £1.5 billion, and it warned about challenging trading ahead, and that knocked the share price. There are no guarantees that a formal bid will be made, but this could be the beginning of the breakup of Thomas Cook.

Ferguson reported a good set of numbers but they failed to meet forecasts. Third-quarter revenue increased by 6.2% to $5.27 billion, but the consensus estimate was $5.35 billion. It was a little concerning that organic growth in the US – its largest market cooled, the US posted quarterly organic sales of 3.3%, and that compared with 9.7% growth in the previous quarter. Net debt rose marginally, and the group tried to curry favour with shareholders by launching a £500 million share buyback scheme.

Avanti Communications on a 12 month basis swung to a profit of $83.2 million, and while it registered a $77.7 million loss last year. The firm’s decision to change its end-of-year reporting time frame brought additional costs, but more importantly the restructuring programme is going well, and the company won a few contacts, which added to the positive update. 

US

The calmer environment in relation to trade has boosted US markets. The JOLTS reported for April was 7.44 million, which undershot the 7.47 million forecast, and the March report was revised down to 7.47 million, from 7.48 million. The update could be viewed as a sign that employers are a little cautious about the future, and are taking on fewer workers, or it might be an indication the jobs market is tightening. Last week’s headline non-farm payroll was disappointing, but it is worth remembering that the jobless rate is at a 50 year low, so the US economy is in a healthy state.

Raytheon and United Technologies announced their intention to merge. The proposed deal would need to be obtain approval from the regulator and even President Trump questioned if the deal would lower competition. If the move goes ahead, it would create a group that would be the second-largest US aerospace and deference firm in terms of revenue. Boeing is in the top spot, but given that the firm has received a lot of negative publicity since the Ethiopian airlines disaster, there could be a challenger on the horizon.

Beyond Meat shares hit a fresh all-time high as the stock continues to dine out of the tasty quarterly results that were posted last week. On Thursday, the company said it expects record revenue of $210 million, and to breakeven, and the guidance was above investors’ forecasts. 

Tilray shares rallied today after the company brokered an agreement with Privateer Holdings – the controlling shareholder in Tilray, to gradually dispose of the firm’s stake in Tilray over the next two years.  

FX

GBP/USD is under pressure as the Troy leadership race heats up. The candidates are setting their positions out, and this is likely to dominate politics in the tear-term. Dominic Raab, said the UK should leave the EU on 31 October, even if it has to be on WTO terms. Jeremy Hunt, claimed he would be prepared to leave without a deal, and Michel Gove declared that Brexit must be delivered. It was estimated that the UK economy contracted by 0.4% in April on a monthly basis, and that weighed on the pound too.

EUR/USD has been hit by the rebound in the US dollar – the greenback suffered greatly last week on chatter of the Fed cutting rates at the back end of last year took-off. It was been a quiet day in terms of economic announcements. Italian industrial output dropped by 0.7%, and economists were expecting growth of 0.1%.

USD/CAD rebounded after Friday’s heavy losses, and Canadian housing starts for May came in at 202,300, which was slightly below the 205,000 forecast and that put some pressure on Canadian dollar.  

Commodities

Gold has dropped today as the US dollar has clawed back some of last week’s losses. The inverse relationship between the metal and the dollar has been strong recently, and that is playing out today. The metal enjoyed a major rally in the past two week’s so a pullback isn’t a major surprise.

WTI and Brent crude haven’t moved today as traders are waiting for Russia to make a decision about future supply levels .The Saudi’s and other OPEC members have expressed their intention to keep the production curbs in place, while Russia is till to make its mind up.

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