Equity benchmarks in Europe are in positive territory this afternoon on the back of US-China trade optimism.

Europe

It was reported in China’s Global Times that both sides have reached a broad consensus on phase one of the agreement. The same announcement claimed that some differences remain in relation to how much tariffs should be rolled back. The news gave traders some hope that things are heading in the right direction, which encouraged them to buy into stocks.   

LVMH upped their offer for Tiffany to $135 per share from $120, and the revised offer has been approved by the boards of both companies. The deal is valued at $16.2 billion but it is subject to regulatory approval. The sweetened proposal by LVMH should give them more exposure to the US’s lucrative luxury goods markets. Some traders might be questioning the logic of the takeover as there are pockets of weakness in the global retail sector, but high-end brands typically outperform when wider consumer appetite wanes, as the mega rich are less sensitive to macro trends.

On Friday, Hochschildmining confirmed it is on track to achieve its production targets for 2019, but it lowered its guidance for 2020, and that continues to weigh on the stock. The group cited problems in relation to permits for the reduced guidance. To make matters worse the company cautioned about higher prices, so the combination of the two has soured sentiment. The metals market is a little subdued, so that is likely to be factor in the stocks underperformance too.

Just Eat shareholders have been advised, by the board of directors, to reject the offer from Prosus, while pressing ahead with the planned merger with Takeaway.com. Prosus are offering 710p per share, but Just Eat’s management want to the deal with Takeawy.com to continue – as it would create an entity that would house the two most profitable online food delivery firms in Europe.      

US

The S&P 500 hit an all-time high due to the positive reports from the trade talks. Over the weekend, it was announced that China are willing to introduce tougher rules in relation to intellectual property (IP), and this is something that Washington DC should be happy with, provided its not just talk. IP has been a major bone of contention for President Trump so if Beijing can implement something that is satisfactory to the US, it should boost chances of a deal being struck.   

Tesla shares are in demand today after the company said it received 200,000 orders for its recently unveiled Cybertruck. The launch didn’t exactly go according to plan as the armoured windows in the vehicle cracked after being struck with a ball bearings. The company has been in the news a lot recently, and the publicity hasn’t always been good, but the group are increasing their production levels, and the newest vehicle seems to be popular.

Uber shares are lower today after it was announced the company lost its licence to operate in London. The regulator said the company was not ‘fit and proper’ to operate in the UK capital. The firm lost its licence to operate in London in 2017, but it was granted two extensions. The US-listed firm has vowed to appeal the decision, but the ruling is a blotch on the firm’s reputation, which might steer customers away from the group. 

Tiffany shares have pushed higher on the back of the news that LVMH has agreed to acquire the company.  

FX

EUR/USD has barely moved today. It has been a quiet day in terms of news in Europe. The German Ifo business climate reading ticked up to 95, from 94.6. The reading met economists’ estimates, and it was the highest level in four months. The single currency has been pushing lower throughout November and a break below the 1.1000 mark could pave the way for further losses.

GBP/USD is higher on the session as the pro-business Conservative party are still in the lead over the Labour party, although according to the Survation poll, the gapped narrowed a little. The currency pair is trading around the 1.2900 mark, so it is basically right in the middle of the 1.3000 – 1.2800 range that is has been broadly been in for weeks. The CBI realised sales report came in at -3, while the consensus estimate was -10. It is concerning the reading is still negative, but it has been the strongest reading in seven months.  

Commodities

Gold is a little lower today on the back of the risk-on attitude of traders. The asset has a history of falling whenever dealers are keen to take on more risk – buy stocks. After hitting a six-year high in September, the metal has been drifting lower, and that is playing out today. Should the recent bearish move continue, it might target the 1,445 region. 

The oil market is showing modest gains as the sentiment surrounding the US-China story is positive. In recent weeks, the energy market has broadly moved in the same direction as global equities – as the overarching US-China trade story is the dominant theme in the markets.

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