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Equity markets are lower as dealers are worried about the global trade situation.

Europe

The standoff between the US and China is not any closer to being resolved, and traders are fearful President Trump will turn up the heat on the EU next.

Daimler shares are lower today after the firm warned that profit could be hit due to China’s tariffs on US vehicles. Two months ago, the car manufacturer posted a 3% increase in first-quarter revenue as car sales reached a record high, and the company increased its full-year guidance. In light of Beijing’s decision to impose tariffs on US vehicles, Daimler predict a dip in profit. The share price has been dropped to a 22-month low, and if the negative move continues it could target 5,500 cents.

Dixons Carphone announced a 23.6% drop in pre-tax profit to £382 million, and it was largely in line with the recent guidance. The firm anticipates next year’s profit will drop to £300 million. Dixons Carphone kept the dividend unchanged, and this was welcomed by investors. In May, the firm announced plans to shut 92 stores, and today it confirmed it had ‘plenty of work to do’ in turning around the business. The share price had a muted reaction today as much of the news was already factored it.

HSBC upgraded Rio Tinto to a buy rating from hold, and upped the price target to 5,100p from 4,700p. The bank believe the quality of its iron ore assets at the Pilbara operation more than offsets the underperforming copper business. HSBC also pointed out that Rio Tinto has a strong aluminium business. The shares are down 0.8% at 4,105p.

US

Stocks are in the red as investors are concerned we could be heading for a trade war. It is interesting that the US is at the centre of a possible economic conflict, but the Dow Jones and S&P 500 are holding up better than indices in Europe. It seems that the EU has potentially more to lose should things escalate between the two sides.

Kroger shares are in demand after the company posted solid first-quarter figures. Adjusted earnings per share came in at 73 cents, topping the forecast of 63 cents. Revenue for the period was $37.53 billion, and the consensus estimate was $37.33 billion. The company is going through a transformation which involves closing some stores. Last month, Kroger struck a deal with Ocado in the UK, and the British firm will help Kroger with its online delivery business. The stock has been rising since October, and if the bullish move continues it could target 3,000 cents.

The Philly Fed manufacturing index dropped to 19.9 in June, from 34.4 in May, and the consensus estimate was 29. It was the weakest reading since late 2016.

FX

GBP/USD was given a boost by Andy Haldane of the Bank of England (BoE). The UK central bank voted 6-3 to keep rates on hold, but the consensus was for a 7-2 vote. Mr Haldane voted alongside Ian McCafferty and Michael Saunders to hike rates, as he believes it is important to put a floor under the pound. Sterling slipped to a seven-month low versus the US dollar this morning, and the BoE update trigged a round of buying.

EUR/USD has edged higher on account of pullback in the greenback. The US dollar index hit a fresh 11-month high today, but dealers booked their profits after the US revealed a disappointing Philly Fed manufacturing index. 

Commodities

Gold fell to another new six-month low due to the rally in the US dollar earlier in the session. The metal has been in a downward trend since April and we have not seen any signs of the bearish move coming to an end. Traders are still mindful of the hawkish comments from Federal Reserve chief Jerome Powell yesterday, and this could keep pressure on gold.

WTI and Brent Crude oil are weaker today as the Opec meeting gets underway. The announcement will be made tomorrow and traders are anticipating some sort of increase in supply. There is talk of output being increased by 300,000 to 600,000 barrels per day (bpd), which is considerably lower than the 1 million bpd that was originally talked about.

 

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