The morning session started off a little on the positive side, on the back of modest gains made in Asia overnight.
Europe
The US and China are in talks today and tomorrow in relation to trade, and that helped raise investor sentiment in Asia overnight. The upbeat mood in Europe didn’t last long as markets handed back some of Friday’s bullish move. When upward moves are short lived it can be a sign that dealers aren’t particularly confident.
Dunelmshares are in demand after the company posted a 2% rise in second-quarter group revenue. The Dunelm brand was popular as sales jumped approximately by 10%, but that was partially driven by the fact the firm closed down some underperforming websites. Core brand like-for-lie sales jumped by 9%, which is a large improvement on the 4% growth registered in the same period last year – which underlines the high demand. Online sales and in-store sales were 38% and 6% respectively, and it is encouraging to see the company is still making mid-digit sales growth on the high street. The share price hit an 11 month high, and if the bullish move continues it might target 700p.
Jefferies upgraded Petrofac to buy from hold, but trimmed the price target from 640p to 590p.
Hays shares are higher today after HSBC upped its rating to buy from hold.
Centrica were hit by a downgrade from Jefferies. The bank reduced its outlook to hold from buy, and cut its price target to 125p, from 170p.
US
The Dow Jones and S&P 500 haven’t moved much today as traders wait and see how the US-China trade talks play out. It is somewhat encouraging that US markets held on to the ground made on Friday, but it would appear that traders are waiting to see how the negotiations go before making their next move. Wilbur Ross, the US commerce secretary, claimed the trade spat is hurting China more than it is hurting the US. The Chinese equity markets are certainly feeling the pain, but the trade figures between the two countries suggest the tariffs are having little impact on international business.
The December reading of the ISM non-manufacturing was 57.6 – a five month low. Economists were expecting 59, and the November reading was 60.7. The prices paid component of the report was 57.7, the lowest reading since August 2017, which suggests that producer price index and consumer price index might fall in the months to come.
FX
The US dollar index has slipped to a level not seen since mid-October due to the less hawkish comments made by Jerome Powell, the head of the Fed, on Friday. The central bankers said monetary policy is ‘flexible’ and the patience will be applied too. Dealers took this as a sign that the US central bank might hold fire on tightening monetary policy this year.
EUR/USD is higher on the back of the slip in the US dollar. Strong eurozone retail sales helped the single too. In November, retail sales for the currency bloc increased by 0.6% on a monthly basis, easily topping the forecast of 0.1% The October report was revised higher to 0.6%, from 0.3%.
GBP/USD has been lifted by the slide in the greenback. Today was a quiet day in terms of economic announcements from the UK, and the positive move was dollar driven. Prime Minister May is trying to secure additional assurances from the EU, and the UK parliament is set to vote on her deal on 15 January. Huge uncertainty still persists, and any sign we are heading for a no-deal Brexit is likely to hurt the pound.
Gold has been helped by the dip in the US dollar. In recent months there has been an inverse relationship between gold and the US, and that is the case today. The metal has been moving higher since mid-August and the bullish momentum picked up in November. A break above $1,300, might bring $1,326 into play.
Oil is extending its rally as last week’s news that Saudi Arabia’s supply fell in December is still playing on traders’ minds. OPEC and partners are due to enact co-ordinated production cut this year, and that is a factor in the bullish move too.
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