Stocks in Europe are set to finish the week on a positive note. 

Europe

A growing sense of optimism surrounding US-China trade has lifted stocks. Yesterday, we heard from a few influential individuals on the US side, Steven Mnuchin and Larry Kudlow, both issued upbeat statements, but more work needs to be done. Disappointing manufacturing figures from Germany, Spain and Italy prompted traders to think about the European Central Bank’s (ECB) meeting next week. The ECB might adopt more dovish language at the update, and some traders are taking the view that the central bank will need to introduce some sort of assistance to the region.

Rightmove share are lower today despite the company posting solid full-year figures. Revenue and pre-tax profit jumped by 10%, and traffic to their site increased by 4%. Average revenue per advertiser topped £1,000 per month, and the time spent on the site increased by 5% to 1 billion minutes per month. The fundamentals are solid, but the group is ‘vigilant’ of Brexit, and investors haven’t forgotten about the post EU referendum share price slump.

WPP confirmed that annual year-on-year revenue dropped by 0.4%, while analysts were expecting a drop of 0.6%. Headline pre-tax profit declined by 11% to £1.86 billion, which was in line with the group’s forecast. Headline operating margin slipped to 15.3% from 16.4%.The group’s turnaround programme is going well as it made 36 disposals in the past 11 months, and net debt is falling.

William Hill registered a full-year pre-tax loss of £575 million, which compared with a profit of £146 million last year. The group previously announced a non-cash impairment of £883 million, which was due to the government regulation slashing the maximum stake on fixed-odds betting terminals from £100 to £2. The firm is looking to the US for expansion and the ambition is to double operating profit by 2023. The existing operations in the US saw net revenue and adjusted operating profit increase by 42% and 91% respectively.

US

The S&P 500, Dow Jones and the NASDAQ 100 are slightly are today progress was made in relation to US-China trade talks. Investors are aware that we are not out of the woods yet when it comes to a trade deal, but we are heading in the right direction.

Annual core PCE held steady at 1.9%, meeting forecasts. The report is the Fed’s preferred measure of inflation, and given that it is stable the US central bank are likely to be ‘patient’ when it comes to changing monetary policy. The latest monthly consumption and income data showed declines of 0.5% and 0.1% respectively, and both are a bit concerning.

Tesla shares are lower after the company said it will cut the starting price for the Model 3 to $35,000, and the automaker will close many stores to accommodate the price cuts. The group has over 350 stores and service locations, but it didn’t map out how many will be closed under the new initiative. The stores that remain open will act as an information centres and as a gallery. Investors often welcome cost cutting, but customers might be reluctant to purchase a big-ticket item online, unless they are near a store that stays open. 

Nordstrom released mixed results last night. Earnings per shares jumped to $1.48, which topped the $1.42 forecast. Same-store-sales increased by 0.1%, which undershot the 1.1% growth forecast that analysts were expecting.  Revenue dipped by 4.6% to $4.48 billion, and the consensus estimate was $4.61 billion. The stock is in the red.

FX

EUR/USD is a little firmer today after the respectable eurozone unemployment and inflation data counteracted the poor manufacturing numbers this morning. CPI in the euro area edged up to 1.5%, while unemployment came in at 7.8% - its joint lowest level in a decade. Early in the trading session, it was reported that German, Spanish and Italian manufacturing sectors were in contraction.

GBP/USD is largely unchanged today after the UK revealed mediocre economic reports. The manufacturing PMI report slipped to 52, from 52.8. Mortgage approvals increased on the month, but mortgage lending actually cooled.   

Commodities

Gold has fallen to a two week low on the back of the stronger US dollar. The inverse relationship between the two markets continues to play out. Gold has been in a firm upward trend since November, and if it holds above the $1,298 area, it is likely to continue. 

Oil is a little higher this afternoon after OPEC output dropped to a four year low, according to Reuters. The feelgood factor in the equity markets has dragged oil higher too, as lately there has been a positive correlation between them.

 

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