Stocks are rallying into the close as trades are a little upbeat about the state of US-China relations.

Europe

This is another day of optimism in relation to China and the buyers are coming out of the woodwork .Theresa May faces a vote of no confidence, but dealers are pricing in a high probability of her staying put.   

Rolls Royce shares are higher today after the group confirmed that trading profit and cash flow will be at the ‘upper half’ of the previous guidance. The company is undergoing an aggressive turnaround scheme, and there is some way to go before the scheme is completed. The firm is still on track to deliver 500 large engines this year, but keep in mind, in March it projected to deliver 550 engines. The group are going to keep working on their Brexit contingency plans until the political situation has been cleared up. The stock has been in decline since August, and if the bearish move continues it might target 733p.

Superdry shares have slumped after the group issued a profit warning. The fashion house now expects underlying profit before tax to be between a range of £55 million and £70 million, and when you take into account the group earned £97 million last year, that would equate to a drop of between 27% and 43%. The company cited the ‘unseasonably warm weather’ for the profit warning – it’s second in two months.

Dixons Carphone had a dreadful first-half as a collection of exceptional charges relating to its UK store estate and mobile phone unit, caused the group to register a loss and trim their dividend. The operating loss for the first-half was £423 million, down from a profit of £71 million, and the interim dividend has been lowered to 2.5p from 3.5p. The share price has been in decline since 2015, and if the negative move continues it might target 120p. 

US

Stocks have rallied on the hope that US-China relations are improving. It was reported that Beijing are in the process of making it easier for foreign companies to gain access to China – that is a sign the Chinese authorise are becoming more open. The political standoff between Beijing and Washington DC has cooled a little after the President said he might involve himself in the case of Huawei, in a bid to smooth over trade relations.   

The headline inflation rate dropped to 2.2% in November, which was a sizeable drop from the 2.5% in October. The core reading ticked up from 2.1% in October to 2.2% in November. The severe fall we have seen in the oil market recently is the reason why headline is tumbling, but core inflation is rising. The rise in core CPI points to firm demand, and that is encouraging to see.

FX

The US dollar index is lower and the softer the headline inflation figure weighed on the greenback. A cooling inflation rate might prompt the Federal Reserve to take a take a less aggressive stance regarding hiking rates.

GBP/USD has soared today ahead of Theresa May’s vote of no confidence. Conservative MPs will vote whether to keep Mrs May as leader later today. The Prime Minister is tipped to maintain her position and that is why sterling is rallying.

EUR/USD is benefitting from the dip in the US dollar. Industrial production in the eurozone grew by 1.2% on an annual basis, and economists were expecting a reading of 0.7%. The sector isn’t the biggest in the region, but it has been one of the better economic reports from the area recently. 

Commodities

Gold has received a boost from the softer US dollar. The metal’s inverse relationship with the US dollar continues. Gold has been experiencing low volatility recently, and the metal has been creeping higher since August, and if the bullish move persists, it could target $1,265.  

Oil edged up after the energy information agency reported a decline in stockpiles. Inventories fell by 1.2 million barrels, and keep in mind they dropped by over 7 million barrels last week.

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