Equity markets in Europe are lower today as traders fear that US-China trade relations could take a turn for the worst following President Trump’s decision to back the Hong Kong bill.

Europe

The US government has put its support behind the citizens of Hong Kong, so that is likely to attract a negative response from Beijing. The Chinese government will view this move by Mr Trump as an attempt to meddle in their internal affairs. Progress has been made on the trade front recently but some of that might come undone on account of the Hong Kong bill. Volatility and trading volumes are low today as the US celebrates Thanks Giving, so the moves witnessed this afternoon aren’t a great reflection of market sentiment.

Virgin Money shares outperformed even though the company halted its dividend in order to use funds to pay off the £385 million charge in relation to the mis-selling of payment protection insurance (PPI). August was the deadline for clients applying for compensation regarding PPI, and the today the management of Virgin Money suggested the worst of it is over in relation to the charges. Given the rally in the stock, traders clearly think a line has been drawn under the scandal, but in light of how long this situation lasted, it is possible we haven’t heard the last of PPI.  

Remy Cointreau shares are in the red as the group issued a cautious outlook for the second-half in relation to the Hong Kong division. The business hub has experienced major unrest in recent months and it is in a recession, hence why the management of the high-end drinks group predicts that trading at the Hong Kong unit will be ‘quiet bad’. On the bright side, the outlook for Mainland China is upbeat as the mid-Autumn festival saw ‘massively good’ demand.  

Future shares are lower again as the group carried out a share placing yesterday as a way for senior management to offload some of their shares. Usually if the CEO as well as the CFO were selling shares in the company it might look bad, but the stock recently hit a record high so some profit taking isn’t a shock.    

US

The New York Stock Exchange is closed today as the US celebrates Thanks Giving.

FX

GBP/USD is fractionally lower as traders are booking their profits from recent gains. An opinion poll from yesterday by YouGov MRP found that Boris Johnson’s Tory party are on track to achieve a 68 seat majority in next month’s general election. The same polling company correctly predicted the hung parliament in the general election years ago, so the report carried weight.   

EUR/USD hasn’t moved much today despite the solid inflation figures from Spain as well as Germany. The Spanish CPI rate jumped from 0.2% to 0.5%, while German CPI reading came in at 1.2%, up from 0.9% in September The German CPI report was the highest since June. Demand in the region has been low, but now we are seeing it tick up, which should bode well for the currency bloc. 

Commodities

Gold is experiencing low volatility, along with most other markets today. The move lower in European equities has helped the metal somewhat as dealers are normally keen to seek out gold and other assets that are deemed to be safe-haven plays when there is uncertainty in equities. The metal has been drifting lower since September and should the bearish move continue it might look to retest $1,445.

Oil is a little lower on the back of US-China trade tensions. The trading relationship between the two largest economies in the world has been very influential in the oil market recently as China is the largest importer of oil in the world. It is worth northing that yesterday, the latest US inventory report showed that oil and gasoline stockpiles increased, which could be a sign that demand is weak.    

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