Stocks are in the red heading into the close as US-China trade tensions have heightened slightly. 


Washington DC added 28 Chinese companies to its Entity List, while China’s government said ‘stay tuned’ as a retaliation is presumably in the pipeline. Traders are bracing themselves for a backlash from Beijing, hence why stocks are lower. On Thursday, the next round of US-China trade talks will continue, but China’s Vice Premier Liu He, will not carry the ‘special envoy’ title, which suggests he does not have clear instructions from Beijing. There is a feeling the trade talks are over even before they have begun.           

The industrial action at British Airways as well as Ryanair has helped easyJetas the airline said it expects full-year earnings to be at the top end of expectations. The Luton-headquartered company anticipates annual pre-tax profit to be £420-£430 million, while the previous guidance was between £400 million and £440 million. The collapse of Thomas Cook recently caused chaos in the travel sector, and easyJet probably befitted from its demise as holiday makers possibly sought out stable firms. The company also said that headline costs would increase by roughly 12% on account of higher fuel costs. Yesterday the stock hit its highest level since early May, so it would appear much of the good news was priced in, which explains the negative move today. 

London Stock Exchange (LSE) shares are in the red today after the Hong Kong Exchanges and Clearing (HKEX) walked away from its bid for the UK group. LSE are in the process of acquiring Refinitiv, so the Hong Kong approach was an unwelcome distraction. From the get go, the LSE said the offer suffered ‘fundamental flaws’ and it would have been a ‘significant backward step’ so it’s hardly surprising that nothing has come of the bid.

It was reported in July that Deutsche Bank will cut 18,000 jobs, and now it is believed that roughly half of the cuts will be in Germany. The struggling bank will posted its largest quarterly losses since 2015 in the summer, as the group incurred a massive restructuring change. Drastic measures are needed as there are serious questions over the bank’s health, but additional deep cuts might be required as the negative deposit rate in the eurozone is likely to squeeze lending margins even further.                    


US equity markets are in the red as traders are walking on eggshells for fear of China’s retaliation for the blacklisting of Chinese companies by the US government. Trade negotiations will restart this week, but dealers are not expecting much as Beijing have already been managing expectations lower.

US PPI dropped to 1.4% from 1.8%, which is a sizeable fall, and adds weight to the argument that demand is falling in the US. The core PPI slipped to 2% from 2.3%, so it is clear that demand is dropping, and we might see softer inflation in the medium term.    

Alibaba, Baidu as well as are in the red as the White House is contemplating curtailing government pension’s exposure to Chinese companies. This is part of the wider US-China trade spat. Trade talks are due to resume this week, but tensions have been creeping higher in the past 24 hours, so the New York listed Chinese stocks are likely to remain in the cross fire.

Domino’s Pizza shares are higher despite a poor quarterly update. EPS came in at $2.05, while the consensus estimate was $2.07. Revenue was $820.8 million, while traders were expecting 823.9 million. Same store sales grew by 2.4% which undershot the 2.8% forecast. To make matters worse, the group trimmed its sales outlook to 7%-10% from 8%-12%.      


GBP/USD has declined sharply today over fears in relation to Brexit. The relationship between the London and Brussels has taken a knock after it was reported that Germany’s Angela Merkel said to Prime Minister Johnson that a deal is ‘overwhelmingly unlikely’. Mr Johnson said that a deal is ‘essentially impossible’ to broker. The souring of relation has prompted dealers to dump sterling.

EUR/USD is largely unchanged as there wasn’t much in terms of European economic reports today. There was a small in increase in volatility on the back of the US PPI report, but there wasn’t a major impact on the currency pair. The euro remains in its wider downtrend versus the greenback, and while it holds below the 50-day moving average at 1.1050, the bearish trend is likely to continue.            


Gold has been nudged above the $1,500 mark as the flight-to-quality effect has taken hold. The renewed concerns about US-China trading relations has encouraged traders to cut their equity positions, and buy up assets that are deemed to be lower-risk, such as gold.     

Oil has been dragged down by the minor tick up in hostilities between the US and China. The energy is sensitive to the mood of the global economy, so traders aren’t too hopeful at the moment about the US making significant progress with China in terms of trade. 

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.


CMC Markets Singapore may provide or make available research analysis or reports prepared or issued by entities within the CMC Markets group of companies, located and regulated under the laws in a foreign jurisdictions, in accordance with regulation 32C of the Financial Advisers Regulations. Where such information is issued or promulgated to a person who is not an accredited investor, expert investor or institutional investor, CMC Markets Singapore accepts legal responsibility for the contents of the analysis or report, to the extent required by law. Recipients of such information who are resident in Singapore may contact CMC Markets Singapore on 1800 559 6000 for any matters arising from or in connection with the information.