Stocks are broadly higher this afternoon even though uncertainty over trade tensions and emerging market (EM) economies are still bubbling away in the background.

Europe

The trade figures from China over the weekend showed the country’s surplus with the US is now at a record level. President Trump has threatened more tariffs, but nothing has been announced yet. The ongoing political and economic issues in Turkey, Argentina and Venezuela are still on the radar, although they are not weighing on stocks in Europe. Natural resource stocks are holding back the FTSE 100.

Associated British Foods maintained its full year guidance as strong performances at its grocery, agriculture, ingredients and fashion division – Primark, will more than offset underperformance of the sugar business. For many years now, it has been the same story at the company – Primark sets the standards, while the sugar business drags on the group. Primark’s low cost model is ensuring the firm bucks the wider poor high street trend. The clothing division anticipates to boost annual sales by 5.5%. The stock has been broadly moving lower since late 2015, and if the bearish move continues it could target 2,000p.

Debenhams shares are in the red after the company confirmed that it is bringing in KPMG to assist with its restructuring. The accountancy firm is expected to propose options like shutting stores, entering a company voluntary agreement (CVA), and disposing of its Danish division. The retailer issued three profit warnings this year and the stock has lost approximately 66% of its value year-to-date. The company was already struggling in the 2013/14 era, and the recent woes of the high street have made matters worse.

Morrisons shares are higher today after HSBC raised the stock to buy from hold, and upped the price target to 300p, from 240p. The supermarket group has made a strong recovery in recent years, and the company will reveal its first-half figures on Wednesday. The stock hit a multi-year high in late August, and we could see the wider bullish trend continue.

US

The major equity markets are slightly higher, but the gains are relatively small. Traders appear to be cautious about buying into US stocks as tensions remained strained between the Washington DC and Beijing. There is chatter that President Trump could unleash hundreds of billions worth of tariffs on Chinese imports, and the Beijing administration have already stated they would we hit back at such moves. As a form of retaliation, China could devalue the yuan or target US companies operating in China. It is almost like traders are waiting for one side to make the first move.

Alibaba shares fell to a level not seen since August 2017 after Jack Ma confirmed that Daniel Zhang will replace him as chairman in one year. Mr Ma has been prepping Mr Zhang for his role for many years, and there was increased speculation in recent days that the announcement would be made.  

FX

GBP/USD received a small boost from the growth figures that were released earlier this morning. The UK economy grew by 0.6% between May and July, and that slightly exceeded the 0.5% growth that economists were expecting. It is also worth noting that industrial production and manufacturing production grew at a slower rate in July, and the reports came in below estimates. The Brexit negotiations were given some hope today when the EU’s Barnier said that a deal is ‘realistic’ in 6 to 8 weeks, and that jolted sterling higher. 

EUR/USD was given a lift by the pullback in the US dollar. The greenback finished last week on a positive note on the back of the strong non-farm payrolls report, and now dealers are booking their profits. Last month the dollar hit a 14 month high, and with increased speculation of two more rate hikes from the Federal Reserve this year, we could see the greenback look to retest those levels.

The US Securities and Exchange Commission (SEC) halted trading of two exchanged-traded notes, Bitcoin tracker one, and Ether tracker one. The SEC cited ‘confusion’ among investors as the reason for the trading suspension. This news put pressure on Bitcoin and Ethereum, and the latter fell to a fell not seen since August 2017 – which indicates how bearish sentiment is.

Commodities

Gold continues to dance around the $1,200 mark and the slide in the US dollar has given the metal a lift. The commodity has been experiencing low volatility recently, but it remains firmly in the downtrend that began in April. While its remains below $1,215 – the 50-day moving average, its outlook is likely to remain negative.

WTI and Brent crude oil prices are higher this afternoon as traders are worried about future supply as new US imposed sanctions on Iran are due to be implemented in November.  On Friday, the Baker Hughes rig count report showed that the number of active rigs dipped by 2 to 860, and although it isn’t much, it still adds to the concerns about supply.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.