Equity markets in Europe are showing modest gains as traders await the resumption of US-China trade talks on Thursday. 

Europe

The mood is one of cautious optimism even though it appears that China are not overly eager to strike a broad trade deal. It was reported the Chinse government are not willing to compromise on topics like industrial policy as well as government subsidies, but that’s not to say that progress can’t be made in the talks. The feelgood factor from Friday’s US jobs report has spilled over to this week, as traders are a little less worried about the health of the world economy.     

It was reported over the weekend that HSBC will cut up to 10,000 jobs. In August the bank announced it was cutting 4,700 jobs. HSBC is looking to trim down its costs, and the finance house seems to be playing catch-up with its peers who have been aggressively restructuring. The London-listed bank derives the bulk of its revenue in Asia, so it might be looking to reduce some of its headcount in Europe. The depressed interest rate environment is holding back banks, plus the US-China trade spat is an issues for HSBC too.

SIG shares slumped after the group issued a profit warning. The firm said there was a ‘deterioration in construction activity in key markets’, which include the UK and Germany. Both counties saw negative growth in the second-quarter, while the UK construction sector is contraction territory. On account of the economic climate, the group is hoping to see ‘benefits from transformational initiatives’. SIG also announced its sale of two businesses for in excess of £260 million, and the most of the funds raised will be returned to shareholders. The profit warning has rocked investor confidence, and traders are likely to remain cautious of the company until the outlook improves. 

According to the British Retail Consortium (BRC) and KPMG, retailers had their worst September since records began. Last month, total sales dropped by 1.3%, which compared with a 0.7% increase in the same month last year. Non-food online sales dropped to a record low, and in-store sales suffered too. Uncertainty in relation to Brexit has prompted consumers to hold-off on making purchases. Associated British Foods, Ted Baker as well as JD Sports are in the red.

IAG shares, are up in excess of 3% after the group announced that revenue passenger kilometres increased by 0.8% in September, while passengers carried ticked up by 0.6%. 

US

Equity benchmarks are marginally lower this afternoon as traders trim their positions in the wake of the strong finish on Friday. The largely positive US jobs report at the back end of last week triggered buying, and the bullish sentiment has cooled a little. Thursday’s US-China trade talks will be in play this week, but already traders are managing their expectations as it seems that China won’t budge on certain issues       

General Electric will freeze pension plans for roughly 20,000 employees in a bid to slash its debt as well as reduce its pension deficit. The company is debt-stricken and lately management have been undergoing moves to cash raise to pay down debt. The stock is lower on the day.

Uber was upgraded by Citigroup to buy from neutral, but the price target was left unchanged at $45. The Wall Street titan is hopeful about the group’s ride-sharing operation. 

FX

EUR/USD is marginally higher despite the poor German industrial orders update. The report showed that orders fell by 0.6%, while economists were expecting a fall of 0.3%. The news adds to dreadful Germany manufacturing numbers that were released last week. It is clear the powerhouse of Europe is undergoing a slowdown.

GBP/USD is a touch higher too as the US dollar has barely moved on the session. It was a quiet day in terms of economic announcements, and the Halifax HPI reading showed that house prices dropped by 0.4% in September on a month on month basis, but sterling had a muted reaction.      

Commodities

Gold is also subdued today as traders don’t know which way to look. The lack of volatility in stock markets has brought about a subdued session in the metal. Gold is hovering around the $1,500 mark, and the wider upward trend is still intact, a break above the $1,535 area could pave the way for the September highs to be retested.  

WTI and Brent crude are higher this afternoon as traders look ahead to the US-China trade talks that will take place later this week. The unrest in Iraq – the second-largest oil producer in OPEC, has brought about supply concerns. The respectable jobs report from the US has steadied traders’ nerves in relation to concerns about the health of the largest economy in the world, which is helping oil too.  

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