Stocks rallied this morning after China announced better-than-expected import and export numbers overnight, but downbeat economic announcements from the US dragged on the major European markets.
Europe
It would appear that dealers are taking their influence from the US. It is a mixed bag this afternoon: the FTSE 100 is back in positive territory, the DAX is in the red, and the CAC is broadly unchanged.
Exports jumped by 9.1%, while economists were anticipating a decline of -3.2%. The impressive figure underlies foreign demand for Chinese goods. Beijing confirmed that imports dipped by 1.5%, but the consensus estimate was for a drop of 10%. The previous report saw a 7.6% decline. It is worth noting that figures might be skewed on account of the Lunar New Year, and there might have been some front-loading of goods. The Beijing authorities have been introducing measures to stimulate business, so that might be factor too. The reality of the situation is we won’t know the true state of Chinese trade figures for a couple of months.
The German economy narrowly avoided falling into recession after recording 0% growth in the final quarter of 2018, having contracted by 0.2% in the third-quarter of 2018. Italy is already in a technical recession and the France economy is flagging too, so the currency bloc is clearly struggling.
Ashmore confirmed that assets under management increased by 3.8%, and revenue ticked up by 13% on the back of higher management fee. Pre-tax earnings dropped by 6% due to losses on new funds when marked to market. Given the turbulence we saw in emerging markets in the latter-half of 2018, it was encouraging to see the company managed to attract additional funds and fees. Mark Coombs, the CEO, owns roughly 39% of the company, said he plans to reduce his shareholding to a more ‘appropriate level’. The announcement put pressure on the stock, but a more diversified shareholding should benefit the company as it would seem less like Mr Coombs’ own entity.
AstraZeneca shares are in demand today after the company posted solid results. Fourth-quarter revenue jumped by 11% to $6.42 billion, which topped the forecast of $6.32 billion. Core earnings per share increased by 22% to $1.58, and that comfortably topped the $1.48 forecast. The group saw strong sales in China, and it intends to increase its exposure to the country. AstraZeneca issued an upbeat outlook too and it predicts ‘high single digit percentage increase’ in product revenue and profit will see mid-teens percentage’ growth.
Credit Suisse posted full-year profit – its first since 2014. The group’s three year restructuring programme finished last year, and it clearly worked. Even though the finance house is back in money making territory, it still expressed concerns about the global economic climate as worries around the US-China trade spat and Brexit are lingering.
US
The Dow Jones and the S&P 500 are in the red on the back of the disappointing economic updates. The retail sales report showed a 1.2% decline, while economists were expecting an increase of 0.2%. The decline jobless claims report was 239,000, which was an increase from 234,000, and the consensus estimate was 225,000. The PPI report slipped back to 2%, from 2.5% in December, and it also undershot the 2.1% forecast. The drop in PPI and the disappointing retail sales figures indicates that demand is weakening, and that is a little worrying.
Cisco shares are higher today after the company revealed solid second-quarter figures last night. The company swung to a profit, as net income was $2.8 billion, and that compares with a loss in the previous year. Revenue edged up 4.7% to $12.4 billion. The tech giant announced that they expect third-quarter sales growth to be between 4-6%, and that was well received by investors too.
The CME Group confirmed that fourth-quarter revenue was $1.2 billion, and adjusted quarterly EPS was $1.77 – topping forecasts. The exchange said that fourth-quarter average daily volume during the period was up 31%, but total revenue per contract dipped.
FX
The US dollar index is lower on the back of the underwhelming data. The economic announcements suggest the economy isn’t in as good a shape as originally thought, which would add weight to the argument the Fed should not tighten interest rates further in the medium-term.
EUR/USD has been given a lift by the slide in the greenback. The fact that Germany narrowly avoided a recession also helped the single currency.
GBP/USD is in the red after Gertjan Vlieghe, of the Bank of England, said that loose monetary policy is likely in the event of a no-deal Brexit. The central banker’s comments put pressure on the pound because as it stands the UK is set to leave the EU without a deal.
Commodities
Gold have been given a lift by the softer US dollar. The commodity has had a negative relationship with the greenback for many months now. Gold has been in an upward trend since mid-November and if the bullish move continues it might target $1,335.
Oil is mixed today. The Chinese trade figures overnight helped the energy, but it has been slipping in the afternoon. The move to the downside in US stock markets on account of the poor data, also weighed on the oil market.
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