Stocks are in positive territory heading into the close as a mixture of the feelgood factor from yesterday’s European Central (ECB) meeting and the improved trading relationship between the US and China has lifted sentiment. 

Europe

The stimulus package from the ECB boosted eurozone stocks, and the DAX hit a level not seen since late July. Beijing revealed that it will exclude pork and soybeans from its latest round of tariffs and that has been seen as a conciliatory move, and the helps its trading relationship with the US. Global trade tensions are at their lowest in a number of weeks, and that has encouraged traders to buy back into the market.       

London Stock Exchange rejected an offer from the Hong Kong Exchange. They said that the bulk of the proposal was in Hong Kong Exchange shares, and that is a far ‘less attractive investment proposition’. The UK group also cautioned about the relationship between the Hong Kong Exchange and the government of Hong Kong, and the LSE said it would ‘complicate’ matters. The recent unrest in Hong Kong does not send out a positive message in relation to business, and that was likely to be a major factor in the decision to knock back the idea of a merger. The Hong Kong group is keen to put the offer direct to the LSE shareholders.

JD Wetherspoon registered a strong set of annual figures. Pre-tax profit after exceptional items increased by 7.1%, and total sales ticked up 7.4%. Like-for-like (LFL) food and bar sales rose by 8.3% and 5.8% respectively. The fact that food sales outperformed the drinks side of the business in terms of growth, shows that their decision to enhance the menu a number of years ago has paid off. When you consider that pubs are closing down, it is impressive that JD Wetherspoon are posting respectable levels of sales. The stock is a little lower today, but keep in mind it hit an all-time high last week – which is unheard of in the pub sector these days.              

US

Sentiment is positive on Wall Street and the S&P 500 isn’t too that far away from the record high. Dealers are a cautiously optimistic about the US-China trade talks, especially in light of news that President Trump is open to the idea of brokering an interim trade deal with China. Seeing as the ECB loosened monetary policy yesterday that might put the onus on the Fed to cut rates next week.    

The headline retail sales report showed a 0.4% jump in August, which easily topped the 0.2% forecast, but the report that strips out auto sales showed zero growth. A move in-depth report showed that there were sizeable falls at restaurants and clothing shops, and general merchandise and furniture sales suffered too. The update could be a sign that US consumers are holding back on account of the recession chatter, or perhaps because of the Chinese tariffs, 

Apple shares are a touch lower after Goldman Sachs cut the target price to $165 from $187. The price target by Goldman’s is the lowest for the tech giant of the major banks. The Wall Street titan predicts a material negative impact’ on profit due to the accounting method Apple will use for the TV+ trial.   

FX

GBP/USD has surged as dealers believe a no-deal brexit is less likely to happen. The speaker of the House of Commons, John Bercow, said he would use ‘creativity’ to ensure that Prime Minister Johnson doesn’t bypass legislation that was put in place to prevent a no-deal scenario. There has also been charter about the DUP softening their stance in relation to regulatory checks between Northern Ireland and Great Britain, but politicians from the party have denied the report.

EUR/USD is a little higher after the rally yesterday. The rebound in the euro in the wake of the ECB update yesterday indicates that much of the dovish meeting was priced into the single currency. It was a quiet day in terms of economic news in Europe.  

Commodities

Gold is higher on the back of the dip in the US dollar. In recent months, the inverse relationship between the two markets has been strong, and the slide in the greenback is assisting the metal. The fact that gold is higher when equities are higher too bodes well for the asset as it suggests that demand is strong.  

Oil is a touch lower as traders are worried about demand levels. The Energy Information Administration and OPEC released reports this week that suggests there will be an oil surplus next year, and that is hanging over the energy market. 

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