Equity markets are largely in positive territory, but there are all edging lower, as the feel-good factor in relation to the US-China trade situation is starting to wear-off. 

Europe

The bounce in Asian markets overnight influenced European dealers ,and now that it is dawning on investors that the US-China stand-off is far from over, and things are likely to get worse before they get better. 

International Consolidated Airlines declared that first-quarter operating profit dropped by 34% to €135 million, and the consensus estimate was €136 million. The company cited the timing of Easter, fuel costs and market capacity for the decline. Revenue increased by 5.2%, but passenger unit revenue dipped by 1.4% - due to lower yields. On the bright side, net debt dropped by 18.7%, and the group confirmed that operating profit in 2019 should be in line with 2018’s performance. Given the surge in fuel prices in 2019, it’s no surprise that profit was hit, but that is likely to impact the whole sector. Ryanair and easyJet have had their own problems in recent months, and it seems that IAG are in a better position to weather the storm of higher fuel costs. IAG have proved to be more reliable than the likes of Ryanair in terms of flights actually taking-off, and that will stand to the airline.  

Thomas Cook shares are in demand this morning after Virgin Atlantic expressed an interest in the company’s long-haul business. Thomas Cook has had a number of suitors recently, as Lufthansa have expressed an interest in the group’s Condor business. The travel company has been struggling lately, and it is looking to sell-off assets in a bid to raise cash and beef up its balance sheet. 

Lonmin shares sold-off this morning after the company cautioned that full-year sales would be at the lower end of expectations. The mining group swung to a profit in the first-half thanks to higher platinum prices, but the less-than-bullish outlook caught trader’s attention. 

US

The small bit of rest bite that we saw in US markets yesterday could just be the calm before the next storm. The increase in levies on $200 billion worth of goods to 25% from 10% doesn’t include goods in transit, so there is still a small window before they are properly imposed, and Mr Trump is lining up a 25% levy on the remaining $325 billion worth of imports. Washington DC has turned up the heat on China, and they are letting Beijing know they are willing to take it up a notch if needed. The S&P 500 and NASDAQ 100 have taken out yesterday’s lows, and it is likely we could see further losses.

It was encouraging to see US headline CPI edge up to 2%, and the fact that the core reading ticked up to 2.1% - meeting forecasts, tells us that US demand is firm.  Yesterday, we saw that core PPI held steady, so the inflation readings are likely to remain robust for the near-term.

Uber will make its trading debut today, and the stock is expected to price at the lower end of its price range at around $46 a share, and that would equate to a market capitalisation of roughly $80 billion, and keep in mind traders were speculating about a valuation above $100 billion a few weeks ago. 

Symantec shares sold-off sharply after last night’s poor update. The firm revealed a slight dip in fourth-quarter sales to $1.19 billion, while the consensus estimate was $1.21 billion. The group expects next quarterly earnings to be between 30 cents and 34 cents, while estimates were 40 cents. Greg Clark, the CEO, announced his departure last night too, and he will be replaced by Richard Hill, a director, on an interim basis. 

FX

GBP/USD was been helped by the dip in the US dollar, and the UK’s broadly positive economic announcements. In the first-quarter, the economy grew by 0.5%, in line with forecasts. Business investment in the first three months grew by 0.5%, which smashed the 0.6% decline that traders were expecting. Industrial output and manufacturing output came in at 0.7% and 0.9% respectively, both exceeded economists’ expectations. 

EUR/USD has been given a lift by the softer greenback. French and Italian industrial output dropped by 0.9% each in March, and this underlines the economic slowdown in the currency-bloc.

USD/CAD sold-off sharply in the wake of the strong Canadian jobs report. The unemployment rate edged lower to 5.7% from 5.8%, the employment change was 106,500, and 73,000 of the jobs created were full-time jobs. The update adds weight to the argument that the Bank of Canada should keep rates on hold for the time being.

Commodities

It’s been the same old story for gold, whereby the metal has been helped by the softer greenback. Gold has been in demand this week due to the dip in the greenback and the sell-off in global stocks, which are both as a result of the US-China trade spat. Gold’s upward move has been relatively small when you compare it with the declines in stocks.

Oil has recovered a small amount of recent losses, and tensions regarding US-China trade have simmered a little, and that has encouraged some short covering, but it is worth noting the US-China situation is far from solved.

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