Trade optimism surrounding the US-China situation has lifted stock market sentiment. 

Europe

It was reported that China and the US will remove their respective tariffs when the first phase of the trade deal is signed. Nothing is a done deal but the talks are heading in the right direction. The trade tensions of late August and early September seem like a distant memory now as there is chatter of undoing the levies. Neither side wants to appear weak, but the tariffs are clearly hurting each other, so a joint de-escalation would be an easy way out. If President Trump is being reasonable with China, he is less likely to turn up the heat on the EU, which is helping stocks on this side of the Atlantic.       

Sainsbury’s registered a 92% drop in first-half pre-tax profit. When you remove the one-off costs, things look better as underlying profit only fell by 14.6% to £238 million, which was in line with the guidance. The general merchandise division underperformed as sales dropped by 2.5% in the six month period, hence why group sales dipped by 0.2%. The rise of Lidl and Aldi has prompted the major players like Sainsbury’s to up their game, and that is why the group tried to merge with Asda, as well as undergoing a restructuring scheme. To keep up with consumer habits, the firm will focus on digitally-led products and services for Sainsbury’s and Argos customers.            

Aston Martin shares had a strong start to the trading session but have since given up some ground. The group swung to a year-to-date pre-tax loss of £92.3 million, while it posted a profit of £23.9 million in the same period last year. The initial bullish move was fuelled by the fact there was positive cash flow of £48 million in the third-quarter, which was an improvement from the £26 million outflow one year ago. The firm maintained its outlook and that was also a factor in the bullish move witnessed on the open. The luxury car-manufacturer reiterated its view that trading conditions are tough, especially in Europe. Since listing on the stock market over one year ago, the share price has driven lower, but it seems to have found support in the 400p area. High-end goods tend to weather a cooler consumer climate better than mid-to-low priced goods, but while Aston Martin remain in the red profit-wise, traders are likely to steer clear of the stock.

Rolls Royce cautioned that full-year profit will be at the lower end of expectations after it declared a £1.4 billion charge in relation to the Trent 1000 engine. The write-down covers cost such as additional maintenance, provisions for future losses plus disruption to consumers. Despite the colossal charge the group sill anticipates to make a profit this year, but it will be at the lower end of the £600-£800 million range. The Trent 1000 issues has been hanging over the group, and some traders are fearful it could turn into a consistent issue.  

US

The rally on Wall Street continues as traders are hopeful about the state of US-China trading relations. Traders are content to buy into already lofty markets as the expectations are that US-China trade relations are on the mend.   

Baidu shares are in demand after the company posted solid-quarterly results overnight. Adjusted EPS was 12.61 yuan and the consensus estimate was 7.88 yuan. Revenue for the period was over 28 billion yuan, which was slightly above traders’ estimates. The company is getting better at mobile activity as daily active users jumped by 25% in September, compared with last year.    

Boeing have been in the news for all the wrong reasons recently. The company has summited its proposed software fix for the 737 Max aircraft to the US as well as the European regulators, but both bodies have requested the documents be revised. The European Union Aviation Safety Agency plus the Federal Aviation Administration flagged serval issues with Boeing’s proposal. The move by the regulators could keep the aircraft in question grounded for an extended period of time, which is likely to hang over the stock price.        

AmerisourceBergen shares are in demand on the back of fourth-quarter figures. EPS came in at $1.61, while the consensus estimate was $1.58. Revenue increased by 5.4% to $45.6 billion, topping forecasts.  

FX

GBP/USD is in the red as it transpired that two of the nine members of the monetary policy committee voted favour of cutting interest rates by 0.25%, while the consensus estimate was for all nine member to keep rates on hold. The UK central bank kept rates unchanged, but the voting breakdown was enough to weigh on the pound. It seems odd the central bankers would want to lower rates ahead of an election as well as Brexit. Should the UK’s exit from the EU turn out to be disorganised, the BoE might cut rates, and you would imagine they would like to cut rates from as high a level as possible, which makes the votes for cuts seem strange.    

USD/CAD is a little lower as the firmer oil price has helped the Canadian dollar. The US dollar index is marginally higher on the session so the rally in the Canadian dollar stands out.   

Commodities

Gold has come under pressure again as dealers adopt a risk-on strategy. The metal has typically performed well when there is turmoil in the equity markets, but seeing as equity markets are strong, the commodity has been pushed lower. The move to the downside has just accelerated , which points to further weakness.       

WTI plus Brent Crude have rebounded today on the back of the US-China trade story. Yesterday, the oil market endured a sell-off as US oil inventories jumped, and it was announced that major OPEC producers don’t want to see further production cuts. The market took a knock on the back of this so the positive sounds from the trade story triggered a wave of bargain hunting today.        

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