Trade hopes have lifted sentiment in global equity markets. 

Europe

The trading relationship between the US and the EU is moving in the right direction as Wilbur Ross, the US commerce secretary, said there might not be a need to impose tariffs on EU vehicles. For some time, traders were worried President Trump would give the EU, the China treatment in terms of tariffs, but the comments from Mr Ross today have given traders hope that an all-out trader war will be avoided, which is why European equity markets are driving higher.   

Hiscox shares are in the red today after the company confirmed it was setting aside $165 million for claims related to hurricane Dorian, as well typhoon Hagibs. The group also cautioned the sector as a whole was experiencing ‘significant’ losses on account of storms in Japan and North America. The fallout from the wildfires in California is going to impact the firm, but the exposure is still unclear. Traders despise uncertainty so news in relation to the wildfires is weighing on the stock, as the unknown liability could be catastrophic.

Ryanair shares hit their highest level in over one year on the back of positive results. In the second-quarter, the group posted an 8.2% increase in net profit – which topped forecasts. The airline said that first-half revenue increased by 11%. Competition in the travel sector has been tough as companies cut prices in an effort to attract customers. Ryanair saw fares fall by 5% in the six month period, but the firm also registered a 16% jump in ancillary revenues, which helped offset the lower fares. The old full-year after-tax guidance was €750-€950 million, and today it was narrowed to €800-€900 million.

The UK gaming sector is potentially going to be hit by even more regulation as a group of MPs have called for the introduction of a £2 minimum limit for online casinos. The group of lawmakers have also called for a ban on the use of credit cards for online gaming. The sector took a hit from the legislation which saw the maximum stake on fixed odds betting slashed to £2 from £100, so the prospect of further restrictions has hit the likes of GVC, William Hill, 888 and Flutter Entertainment.

Out of the group, Flutter have held up the best as their update in August showed that sports betting accounts for approximately 80% of their revenue, while the casino unit equates to roughly 20% of income. GVC, William Hill and 888 are far more exposed to casino style gaming, hence why the shares have suffered so much. When it comes to regulation in the UK, the tide seems to be turning towards tougher rules so the London listed firms will probably continue to move into fresh markets like the US.                   

US

The bullish sentiment on Wall Street has been underlined by the fresh all-time highs achieved in the Dow Jones, S&P 500 and NASDAQ 100. The US-China trading relationship is heading in the right direction, which is driving the rally. The continued chatter that Beijing and Washington DC are close to signing phase one of the trade deal is lifting the mood in the markets.    

Under Armour confirmed the Justice Department as well as the Securities and Exchange Commission are conducting an investigation into the company on the grounds of its accounting practices. The probes relates to concerns the group moved sales from one quarter to another. Questions about the validity of a group’s accounting procedures typically triggers a sell-off in the stock price as it is a matter of confidence being shaken. The fashion house also announced quarterly numbers today.  EPS were 23 cents, which easily topped the 18 cents forecast. Revenue dipped by 1% to $1.43 billion, marginally topping estimates, but the news of the investigation took precedence.

McDonald’s shares are in the red after it was announced the CEO, Steve Easterbrook, was sacked from the firm for having a relationship with co-worker – in breach of the company’s procedures. The share price put in a solid performance under his leadership, so some traders are a little worried the next CEO won’t be as successful. The corporate policy seems strange as the relationship was between two consenting adults, but then again policies must be adhered to.

Uber is in focus as the group will release its third-quarter figures after the closing bell. The firm lost $5.2 billion in the second-quarter and the firm is tipped to lose in roughly $8 billion this year, so expectations have been lowered. Given the rate it is burning through cash, it is no surprise the firm has trimmed the headcount, while making inroads into emerging markets.   

FX

EUR/USD has been pushed lower by the firmer greenback. The eurozone posted largely underwhelming manufacturing reports this morning which left traders unenthused. The final reading of the Spanish manufacturing PMI report showed activity fell to its weakest since 2013. The French manufacturing sector is showing minimal growth as the reading was 50.7. The German reading was 42.1, which is still dreadful, but at least it improved from the flash reading of 41.9.

GBP/USD has been hit by the firmer US dollar. The British construction sector is still experiencing negative growth as the construction PMI report came in at 44.2, but economists were expecting 44. Brexit uncertainty has been hanging over the industry, and in light of the extension, the sector is likely to remain under pressure.   

Commodities

Gold is lower today as a mixture of a risk-on attitude by traders, combined with a firmer US dollar has weighed on the metal. New record highs were set on Wall Street, which is partially to blame for the fall in gold as dealers are keen to take on more risk and in turn shy away from safe haven assets like gold. The move higher in the dollar makes gold relatively more expensive to buy, which is also hurting the metal.

The progress that is being made in the US-China trade situation has boosted the oil market. The trade spat between the two largest economies in the world has hung over the global economy, so the positive noises from both sides has lifted sentiment.  

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