The US-China trade deal remains in focus and the historic agreement is due to be signed in the next few hours. 

Europe

Dealers in Europe have been cautious today, hence why the major indices haven’t moved much. The interim trade deal between the two largest economies in the world should help global trade relations, so that should ease concerns in this part of the world. The strength of the US equity markets has helped European benchmarks, but the mood is still relatively muted.  

It would seem the reports about the quality of Persimmon’s houses have caught up with the company as total completions in the last financial year cooled by 3.6%, hence why revenue slipped by 3.5%. The group’s reputation was called into question late last year when it was reported there were problems with some of the houses they build. The firm will now focus on improving quality. The company is in a ‘strong’ position for 2020, and the group expects to perform in line with expectations this year.

Vistry also posted a full-year trading report which covered the basic details of how the company performed in the past 12 months. The annual report will be announce next month. The number of completions ticked up by nearly 2.9%, and the forward sales for 2020 is ‘strong’. Vistry was previously known as Bovis Homes, said the full-year pre-exceptional profit-before-tax metric will be marginally above market forecasts.  

Tullow Oil continues to have a tough time as the company revealed a $1.5 billion write-down this morning. The charge was related to the company’s prediction in relation to the price of oil. It previously was working off a $75 per barrel basis, while now it has been lowered to $65. In December, confidence in the company was shaken when it issued a profit warning, suspended the dividend, as well as announcing the departure of two executives. The struggling oil company confirmed today that it will lower its headcount as well as review its portfolio.  

US

The Dow Jones and the S&P 500 have set new record-highs as traders wait the signing of the US-China trade deal. Larry Kudlow, an economic advisor to President Trump claimed that phase one of the trade deal will add 0.5% extra to the 2020 growth rate. The announcement was only a projection, but there is a broad view the trade deal will help the US economy. The headline PPI rate edged up to 1.3% from 1.1%, but the core reading slipped from 1.3% to 1.1%, and the latter reading is deemed to be more important by some traders.

Goldman Sachs shares are slightly higher this afternoon on the back of mixed quarterly figures. EPS fell to $4.69, while the consensus estimate was $5.47. Litigation costs were cited for the disappointing earnings figure. Revenue for the period jumped by 23% to $9.96, easily topping the $8.51 billion forecast. From an operational point of view things are looking good for the Wall Street titan as the global markets unit posted a 33% increase in revenue. A strong performance in bond trading, as well as a respectable performance at the equity division helped the overall department. Investment banking revenues slipped by 6%, which is a little worry as the company shouldn’t be overly dependent on its financial markets division for business.

Target shares have tumbled today on the back of poor Christmas sales. Same-store-sales for November and December only increased by 1.4%, which was a big fall when compared with the 5.7% growth registered in the same period last year. It was revealed that toy sales were flat, and that really struck a chord with traders as Christmas is a crucial period for the sector. The one saving grace was the full-year guidance was kept on hold. 

Bank of America issued a middle-of-the-road update. EPS increased by 6% to 74 cents, and the consensus estimate was 68 cents. It is worth noting the EPS metric was helped by the decrease in the number of outstanding shares. Revenue slipped by 1% $22.5 billion, and that marginally topped forecasts. The trading unit posted a 13% increase in profit, thanks to a 25% rise in bond trading revenue. The net interest rate margin dropped from 2.52% to 2.35%, hence why the retail banking operation posted a 10% fall in earnings. The stock is in the red. 

FX

GBP/USD has been helped by the dip in the US dollar. The cost of living in the UK cooled to 1.3%, a three year low. The previous reading was 1.5%, while economists were expecting 1.5%. The core reading dropped too. It fell from 1.7% to 1.4% - which underlines the fall in demand as the core metric is viewed as a better gauge.

EUR/USD has also been lifted by the slide in the greenback. In 2019 the German economy grew by 0.6% which met forecasts, and keep in mind the economy grew by 1.5% in 2018. The powerhouse of Europe is slowing down, which highlights the problems of the bloc.

Commodities

The dip in the US dollar has helped gold. The metal’s inverse relationship with the greenback is playing out today. Volatility in gold as dropped off in tandem with the cooling of tensions surrounding Iran. The strength of the gold market is all the more impressive seeing as the Dow Jones and S&P 500 have hit all-time highs - stock market rallies usually weigh on gold.

WTI and Brent crude sold-off following the release of the Energy Information Administration report. The update showed that US oil stockpiles dropped by 2.54 million barrels, while dealers were only predicting a 474,000 barrel fall, but the gasoline report showed that stockpiles jumped by 6.6 million barrels. The high gasoline level suggests that demand is weak, hence why the energy market is lower. 

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