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Equity markets are a little in the red as some of the bullish sentiment surrounding US-China trade relations have cooled.

Europe

The lack of additional news in relation to the trade talks has encouraged traders to unwind some long positions, dealers are eager to find out the final details of the negotiations. Beijing revealed underwhelming CPI and PPI figures overnight, and that underlines diminishing demand in the second-largest economy in the world.   

Halfords shares have sold-off severely after the group warned on profit. The firm now expects full-year profit before-tax to be between £58 million and £62 million, while in November, the company predicted that earnings will be largely in line with last year’s figure of £71.6 million. The company blamed the mild weather and the softer consumer environment for today’s negative update. The share price gapped lower, and a break below 200p, might bring 188p into play.

Tesco shares rallied after the firm revealed solid figures. The supermarket said UK Christmas sales rose by 2.2%, and like-for-like (LFL) sales in the UK and Ireland including Booker Group increased by 1.9%. British and Irish Christmas LFL sales increased by 2.6%, both in terms of volume and value – it is impressive as it suggests the group didn’t resort to discounting to draw in customers. Low single digit sales growth may not be much, but it puts the firm well ahead of the other ‘big four’. Adding to the respectable numbers, Tesco declared it is ‘confident’ in its outlook, and that it is ‘bang on track to deliver’ their plans. It is obvious that Dave Lewis’ turnaround plan is paying off. The stock has been pushing higher since late December, and a break above the 230p region, should pave the way for further gains.

Marks and Spencer shares are in demand after the company revealed poor food sales, but they topped forecasts, so sentiment is upbeat. Same-store food sales fell by 2.1% in the third-quarter, while equity analysts had predicted a 2.5% drop. In the same period last year, the retailer registered a 2.7% decline. The clothing and homeware unit continues to drag on the company as LFL sales declined by 2.4%, while the consensus estimate was for a 1.6% drop. The group described their performance as ‘steady’ in a ‘difficult’ market, but on the bright side, the transformation plan is ‘on track’. The stock is one of the most shorted companies on the London Stock Exchange, and in light of today’s update, the short squeeze is likely to continue for a few days.

Debenhams declared that that same-store-sales over the 18 weeks until 5 January fell by 5.7%. The retailer described October and November as ‘very tough’, and in relation to funding, they said they are in talks with Mike Ashley. The stock has been in decline since August, and if the negative move continues, it might retest the 3.45p region.

Jaguar Land Rover confirmed it will cut 4,500 jobs in a bid to save money. The group is overly dependent on diesel vehicles, and given the crackdown on emissions, petrol cars have become more popular. The company derives a sizeable portion of its revenue in China – which is cooling, and that is a factor also.

US

The Dow Jones and S&P 500 are in the red as the excitement in relation to US-China trade talk has worn-off, and investors have banked some profits. There are concerns for the state of the US retail sector after Macy’s issued an underwhelming update. 

Macy’s shares have slumped today after the retailer revealed weak sales during the holiday season. The firm announced that same-store-sales in November and December edged up 1.1%, and the group cut its full-year earnings outlook. The company fared well on Black Friday, but had a disappointing Christmas. Macy’s previously predicted that annual same-store-sales would increase by between 2.3% and 2.5%, and now the guidance is 2%.

Bed Bath and Beyond shares have rallied on the back of the strong third-quarter results last night. Earnings per share for the period were 18 cents, topping the 17 cents forecast. The guidance caught trader’s attention. The group foresees full-year earnings in line with last year’s number, while analysts were projecting a 20% drop.

The jobless claims rate dropped to 216,000, from the revised 233,000 Traders were expecting 225,000. When you take into account last week’s ADP update, and the non-farm payrolls report, it is clear the US jobs sector is in rude health.

FX

EUR/USD is lower due to poor numbers out of France. French manufacturing production in November fell by -1.3%, while economists were expecting zero growth, and industrial production dropped by 1.4%, and the consensus estimate was 0.4%. These are the latest disappointing economic updates from the second-largest economy in the eurozone, and it adds weights to the argument that the region is undergoing an economic slowdown. 

GBP//USD has been hit by the firmer US dollar. The pound has been trading in a small range versus the US dollar this week as the political toing-and-froing in relation to Brexit hasn’t moved sterling much. Traders are becoming immune to the political noise, and some are waiting on the sideline until next week’s vote in parliament.

Commodities

Gold is a little lower due to the move higher in the US dollar. The metal is experiencing low volatility today, and the wider upward trend that has been in play for roughly four months is still intact. If the commodity breaks above $1,300, it might target the $1,326 region.

Oil is in the red as traders book their profits from yesterday’s major rally. The mood has lightened a little in the wake of the US-China trade talks, and that is weighing on the energy market too.

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