European equities have rallied today as the US-China trading relationship has improved a little. 

Europe

President Trump met with Xi Jinping over the weekend at the G20 summit, and some progress was made with regards the trading relationship. Both sides agreed not to impose additional tariffs on each other, and Donald Trump has decided to relax the restrictions on US companies that deal with Huawei, provided it doesn’t impact national security. The Beijing government pledged to purchase more farming equipment from the US as a gesture of good faith. Traders are viewing the lack of negative news, as good news for the stock markets.   

Deutsche Bank shares are higher after there was talk the bank is considering cutting up to 20,000 jobs. The bank’s CEO, Christian Sewing, is expected to deliver another restructuring plan in the near-term and there is speculation that an aggressive round of cost cutting could be revealed. If there are job cuts, there is speculation the bank’s trading division in the US will be hit hard. Reducing the size of trading operations have been common across the banking sector since the credit crisis. Deutsche Bank’s share price hit a series of all record-lows in 2019, and the finance house is determined to trim down its size, and stay off the bear’s radar. 

The JPMorgan Chinese Investment Trust is one of the best performers on the London market today, and that is hardly a surprise given the surge in mainland Chinese shares overnight. The stock has been driving higher throughout 2019, and a break above the 305p area might put the 330p region on the radar.             

Future shares are in demand today after the group said full-year results will be ahead of expectations thanks to solid audience growth in the media operation. There has been a change in senior management too as Penny Ladkin-Brand will step down as Chief Financial Officer, and start as Chief Strategy Officer in 2020.      

International Personal Income shares continue to suffer as investors remain concerned the prospect of a change in regulations in Poland could impact the firm’s profit margins. The Polish regulator is considering lowering the cap on non-interest costs lenders can add to loans.           

US

The S&P 500 reached a hit a new intra-day record high thanks to the improved trading relationship with China. The announcement the Trump administration would loosen the limitations imposed US companies dealing with Huawei gave stocks like Skyworks Solutions, Advanced Micro Devices, Micron Technology, Qualcomm a nice boost. The semiconductors took a knock when the Huawei ban was launched, and now we are seeing a reversal of that negative move.

The Macau gaming authority announced that gross gaming revenue in Macau increased by 5.9% in June, and that exceeded the consensus estimate of 2 5%. The news propped up the shares of Wynn Resorts and Las Vegas Sands. 

FX

EUR/USD is in the red as the US dollar has edged up, and the greenback’s success is partially driven by the slight improvement in US-China trade talks. The eurozone broadly posted disappointing data this morning. The Spanish manufacturing PMI reading was the weakest since April 2013, and the Italian and German manufacturing sectors remain in contraction territory. It is worth pointing out the French PMI report was 51.9 – the strongest in nine months.

GBP/USD is also in the red as the UK manufacturing PMI update was 48, while economists were anticipating 49.2. The report was the lowest reading since February 2013. The manufacturing sector isn’t a huge component of the UK economy, but the reading in concerning nonetheless. UK mortgage lending dropped from £4.09 billion in April to £3.1 billion in May, and the size of the drop suggests potential home buyers are nervous.      

Commodities

Gold has sold-off today as traders are in a risk-on mode in light of the US-China trade talks that were held at the G20 meeting over the weekend. The firmer US dollar has hurt the metal too as there has been a strong inverse relationship between the greenback and the metal in the past few months. Gold enjoyed a major rally in June so a pullback isn’t a surprise, and if it holds above the $1,382 mark, the wider rally should continue.

Oil received a double boost today as the broadly positive reaction to the US China trade talks has lifted the oil market, and the chatter that OPEC will extend the production cuts for an additional nine  months has boost the energy market too. Non-OPEC members need to approve the deal tomorrow, but there has been talk that gaining approval shouldn’t be a problem.            

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.