Stocks are largely positive as we approach the close as traders are a little less fearful about the US-China trade situation.
Europe
Peter Navarro, US trade advisor, said the speculation the White House is considering delisting Chinse companies from US stock exchanges was ‘fake news’. At the back end of last week, there was chatter that President Trump was considering limiting US exposure to China, and the possibility of delisting Chinese firms was mentioned. The announcement from Mr Navarro has encouraged traders to pick-up stocks as this puts the US-China trade relationship back on positive footing. Traders are optimistic about next week’s trade negotiations.
Metro Banks shares are higher today after it was reported that activist investor, Elliott Advisors, are considering buying a stake in the troubled lender. The stock is now showing modest gains, but it was up over 10% earlier. The financial firm has had a dreadful 12 months as an accounting error caused the group to under estimate its loans exposure, which prompted the company to raise £350 million to beef up its balance sheet. The error rocked confidence in the company, and the subsequent investigation into the senior management by the FCA has weighed on the stock too. Elliott Advisors may well be contemplating an investment in the firm, but as the credit crisis taught us, confidence in a bank is hard to win back.
Whitbread were downgraded by Barclays as the bank cut its outlook to equal weight from overweight, and the target price was cut to 4,350p from 4,700p.
The weakness in the underlying silver market as weighed on Fresnillo. UBS raised their price target for the silver miner to 750p from 725p, but unfortunately the move in the commodity market took precedence.
The demise of Thomas Cook has assisted stocks in the travel sector as traders took the view that stable firms would be sought out by consumers. HSBC reiterated its buy rating for easyJet, plus the bank maintained its price target for the stock, which is slightly higher on the session.
US
The major indices are in positive territory thanks to the comments from Peter Navarro that shot down the idea that the Trump administration is going to remove listed Chinese companies from US exchanges. The trade saga continues, and for now the mood seems to be cautiously optimistic. The Chicago PMI slumped to 47.1 from 50.4 in August. The poor reading reinforces the view the global manufacturing sector is in contraction.
Bed Bath & Beyond shares received a boost from Wedbush as the bank increased their rating for the stock to outperform from neutral. The Fed cut interest rates twice in three months, and recently we have seen positive housing data from the US, which also bodes well for the company. The stock has been pushing higher since mid-August, and if the bullish trend continues it might target the $12.00 area.
Apple shares are higher this afternoon as an equity analyst at JPMorgan upped their price target from $243 to $265. The stock is up over 1%.
FX
EUR/USD fell to be level not seen in over two years as German CPI slipped to 0.9% from 1%. The dip in the inflation rate points to dwindling demand in the largest economy in the eurozone, which worried traders. Last week, Germany’s flash manufacturing PMI reading was the weakest in over 10 years, so traders are worried the power house of Europe is heading for a recession.
GBP/USD is higher this afternoon even though Arlene Foster, the head of the DUP, said she would not accept a time limited backstop. On Friday, the currency pair dropped to its lowest in over two weeks, and it appears we are seeing some bargain hunting today. The rally in sterling is all the more impressive as the greenback is broadly higher too.
Commodities
Gold is lower on the day as a mixture of the firmer US dollar combined with the risk-on attitude of traders has hurt the metal. Lately, there has been a strong inverse relationship between the greenback and gold, which is playing out today Gold has been driving lower for over three weeks, and should the metal hold below $1,480 mark it could pave the way for further losses.
Brent crude as well WTI are lower as Saudi Arabia is making good progress in relation to getting their oil production back up to speed in the wake of the attack earlier this month. The speed at which that production is being returned has reduced fears about supply levels, but in light of fears about a global manufacturing recession, there are renewed fears about demand.
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