Stocks have handed back their earlier gains as the DAX 30 and CAC 40 are in the red, while the FTSE 100 is only showing a small gain.

Europe

The session has been subdued in the last few hours as concerns about the US-China relationship and the mixed labour data from the US has chipped away at the previously positive sentiment. The strained relationship between the US and China has been an issue lately and now the situation is a little worse. It was reported the Chinese government ordered the closure of the US consulate in Chengdu – as a way of hitting back at the US’s decision to close the Chinese consulate in Houston. On its own, it isn’t a major issue, but there has been an absence of positive news today.      

Unilever had a strong performance in North America and that helped the company easily exceed equity analysts’ expectations. Second quarter underlying sales fell by 0.3%, while the consensus estimate was -4.3%. Turnover for the first half €25.7 billion, a 1.5% fall on the year. EPS in the six month period increased by 6.4% to €1.35. The operating margin rose by 50 basis points to 19.8%. Like many other companies, Unilever reacted to the pandemic by keeping an eye on its cash flow, which increased by €1.3 billion to €2.9 billion. The dividend was maintained at €0.41. The stock is one of the best performers in the FTSE 100 today.   

Publicis Groupe, the French advertising agency, confirmed that second quarter underlying sales dropped by 13% to €2.29 billion, but the market was expecting it to decline by 20%. When the pandemic struck many companies started to curtail their expenditure, and marketing and advertising budgets were in the firing line. Even Google’s parent, Alphabet, noted a dip in advertising at the height of the lockdown. Traders bought into Publicis as it turns out the downturn wasn’t as painful as initially predicted. WPP shares are in demand too. 

Petropavlovsk, the gold miner, posted a 42% jump in production to 320.6 Koz. The group said it is on track to hit its full year production target of between 620 Koz and 720 Koz. Gold hit the highest level since September 2011, so the recent rally in the commodity and the surge in output has boosted the stock. Alya Samokhvalova, the CEO, said that operations will not be impacted by wrangling that is going on in the boardroom.

G4S stated that first half operating profit declined by 4.6% to £187 million, but that was better-than-expected as equity analysts were expecting £159 million. The group has been undergoing restructuring, which cost it £25 million, but it expects to save £100-£200 million from restructuring and increased productivity. The security specialist blamed the pandemic for the 22% fall in conventional cash revenue At the peak of the pandemic, the company confirmed it would not be paying a final dividend. Today it said it would restart paying a dividend when the economic uncertainty falls to an acceptable level. 

 US

The S&P 500 is a touch lower today as the mixed jobs data prompted a mildly negative reaction from traders. The NASDAQ 100 is underperforming versus the broader market. The jobless claims reading increased from 1.3 million to 1.41 million, while economists were expecting it to hold steady. It was the first rise in the reading in 16 weeks. The continuing claims report dropped from 17.3 million to 16.19 million, and the sizeable fall suggests that people are returning to the labour market.

Tesla shares are motoring higher thanks to the impressive second quarter results that were announced last night. The auto-manufacturer revealed a profit of $104 million – its fourth consecutive quarterly profit, so now it is eligible to join the S&P 500 index. EPS was $2.18, and that smashed the $0.03 forecast. Revenue was $6.04 billion, topping the $5.37 billion estimate. The firm generated $428 million in regulatory credit, which was a big jump on the $111.2 million registered last year. The company is hoping to double its revenue from regulatory credit in this financial year, when compared with last year. Earlier this month, there was speculation that Tesla might build a second plant in China, which was followed by a report it might build a sales and maintenance centre. Last night it was confirmed company will build a manufacturing plant in Texas.    

Twitter shares are in demand today on the back of the mixed second quarter update. Monetisable daily active users (mDAU) is a carefully watched metric for social media companies, and the group reported a 34% jump in that metric on an annual basis – the highest increase since that figure has been reported. MDAU was 186 million, which topped the 172.8 million forecast. Revenue came in $683 million, while equity analysts were expecting $707 million. The social media giant cited the pandemic and the lockdown for its recent increase in popularity – forcing people to stay at home prompted some to turn to social media. Twitter’s reputation took a knock due to the hacking of a number of high profile accounts recently, so the security breach is still hanging over the group.

Microsoft posted a respectable set of fourth quarter numbers but the forecast was a touch softer than expected. EPS was $1.46, topping the $1.34 forecast. Revenue rose by 13% to $38.03 billion, while the consensus estimate was $36.5 billion. The cloud division saw a 47% rise in revenue, but keep in mind it grew by nearly 60% in the previous quarter, so there are some worries that growth is tapering off. The tech-giant anticipates first quarter group revenue to be $35.61 billion, but going into the announcement, traders were predicting $35.91 billion.  

FX

The US dollar index fell to a fresh four month today, but it has since recovered a little. Lately, the greenback has come under pressure when dealers have been in risk-on mode. Volatility has been low across the board today hence why the dollar is largely flat. The mixed jobs data from the US initially helped the dollar, but it is now back below the pre-announcement level.

Even though the greenback is in the red, GBP/USD is largely flat. Fears continue to circulate in relation to the UK potentially ending up in a no-deal scenario when the transition period ends. Today is the final day of planned negotiations and progress has not been made in regards to brokering a deal. The move in the pound isn’t that big when you consider what is at stake, but perhaps, dealers believe deep down that a compromise will be reached. 

EUR/USD has been helped by the dip in the dollar. The German GfK consumer climate reading for July was -0.3, which was a rebound from the -9.4 registered in June. The French business sentiment index for July was 82, and that an improvement on the 78 posted in the previous update.     

Commodities

Gold has been on driving higher lately and today it eked out yet another new multi-year high. The metal hit its highest mark in over eight years. The weakness in the US dollar lately has been a factor in its positive run. Some traders are buying into gold as bond yields are extremely low, and in certain cases, they are negative.

WTI and Brent crude are in the red today as the slightly downbeat mood in the markets overall is weighing on the energy. The heightened tensions between the US and China have been circulating today and it has chipped away at market confidence in the last few hours. In the past two days, the API and the EIA report both showed a big jump in US oil stockpiles, so that is a factor in the bearish move too.


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