UK/Euro Financial Market Daily Morning Briefing – UK/Euro Financial Market Daily Morning Briefing
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A daily snapshot of the UK, French, German and Dutch markets just after the market open. Including a diary of key financial events across the UK and a summary of U.S after market close. Click here to receive or daily bulletins. News provided by AFX/Associated Press.
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UK/Euro Financial Market Daily Morning Briefing 08-01-2019
01/08/2019
Morning Euro Markets Bulletin
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London open: Stocks edge up on positive US cues; Morrisons drops after update
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London stocks edged higher in early trade on Tuesday, taking their cue from a positive session on Wall Street as investors grew hopeful of an improvement in trade relations between the US and China.
At 0830 GMT, the FTSE 100 was up 0.3% at 6,830.43, while the pound was down 0.1% against the dollar at 1.2766 and 0.1% firmer versus the euro at 1.1157 following a report that Prime Minister Theresa May is in secret last-minute talks with EU leaders about possibly extending the 29 March Brexit deadline.
Meanwhile, Chinese and US officials were due to kick off a second day of talks in Beijing later.
Mike van Dulken, head of research at Accendo Markets, said: "With the first day of talks producing no major headlines, traders are looking to a potential post-talks soundbites to feel the pulse of both sides. Chinese Vice Premier and President Xi’s top economic advisor Liu He was among the negotiators, underscoring how seriously Beijing was taking this first round of talks."
In corporate news, pub operator Greene King rallied as it posted a 10.9% jump in like-for-like sales over Christmas and the New Year and expressed confidence over the full year, while Safestore rose as it reported a 135% increase in full-year pre-tax profit.
After a good day on Monday on the back of a well-received update from homeware retailer Dunelm, retailers were faring less well.
Morrisons was in the red even as it reported stronger-than-expected retail sales over the festive period. Investors were pleased with the company’s like-for-like sales growth but disappointed by another relatively weak performance form the core retail arm.
Richard Hunter, head of markets at Interactive Investor, said: "The shares have fallen foul of the wider and weaker market environment, having dipped 14% over the last six months, although over the last year the 2.5% decline in the price compares favourably with the FTSE100, which has dropped 11.5% in the corresponding period.
"With the bar expected to be high in terms of forthcoming updates from the other supermarkets, the general market consensus of the shares as a hold tends to suggest that investors consider there to be better value elsewhere."
Outside the FTSE 350, sportswear retailer Footasylum was under the cosh as it warned that full-year earnings would be towards the lower end of analysts’ forecasts, while gross margin will be lower than current market expectations as a result of heavy discounting over Christmas.
The company said it had seen "some of the most difficult trading conditions in recent years" over Christmas, amid economic uncertainty and weakening consumer sentiment.
Elsewhere, building materials group SIG was the worst performer on the FTSE 250 after saying it expects profit for 2018 to drop on the back of lower trading revenue amid challenging market conditions.
In broker note action, Vodafone was cut to ‘underperform’ at RBC Capital Markets, while Ryanair was downgraded to ‘sell’ at Berenberg and Smiths Group was downgraded to ‘underperform’ at Bank of America Merrill Lynch.
Vesuvius and Rotork were upgraded to ‘buy’ by Merrill, while Petrofac was lifted to ‘market perform’ at Bernstein and Ashtead was lifted to ‘neutral’ at UBS.
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Europe open: China trade hopes boost shares
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European shares opening in positive territory on Tuesday as the feel-good factor from Sino-US trade talks encouraged investors, albeit tinged with caution.
The pan-European Stoxx 600 index was up 0.27% in early trade with all major European bourses in the green.
"With the first day of talks producing no major headlines, traders are looking to a potential post-talks soundbites to feel the pulse of both sides,” said Mike van Dulken, head of research at Accendo Markets, said.
“Chinese Vice Premier and President Xi’s top economic advisor Liu. He was among the negotiators, underscoring how seriously Beijing was taking this first round of talks."
SpreadEx analyst Connor Campbell said there was nothing “too substantial to justify such positivity, but rather a lack of mood-dampening comments has green-lit an early European rebound”.
On the economics front, German industrial production slipped 1.9% month-to-month in November, well below the consensus for a 0.3% increase.
The year-over-year rate slipped to -4.7% from a downwardly-revised +0.5% in October. Net revisions to the month-to-month data were -0.3 percentage points.
“This headline is much worse than we expected. Production was hit by weakness across the board, but the 4.1% month-to-month drop in output of consumer goods did the main damage,” said analysts at Pantheon Macroeconomics.
“Production of capital and intermediate goods fell by 1.8% and 1.0%, respectively, and the weakness persisted outside core manufacturing too. Output in the energy and construction sectors slipped by 3.1% and 1.7%, respectively.”
“We think production rebounded in December, but these data have crushed all hope of a Q4 rebound in manufacturing following the weak Q3, which was driven mainly by falling exports and output of cars ahead of the new EU emissions regulation.”
“We now think production fell 1.4% quarter-on-quarter in Q4, only slightly worse than the 1.7% plunge in Q3. In other words, the German manufacturing sector was in recession in the second half of 2018, reflecting in part the fact that the industry hit capacity constraints earlier in the year and rising global uncertainty amid the trade conflict between the U.S. and China.”
In corporate news, Morrisons was in the red even as it reported stronger-than-expected retail sales over the festive period. Investors were pleased with the company’s like-for-like sales growth but disappointed by another relatively weak performance form the core retail arm.
Richard Hunter, head of markets at Interactive Investor, said: "The shares have fallen foul of the wider and weaker market environment, having dipped 14% over the last six months, although over the last year the 2.5% decline in the price compares favourably with the FTSE100, which has dropped 11.5% in the corresponding period.
Signify was the largest faller on the STOXX 600 after a downgrade to neutral from Bank of America Merrill Lynch. Rotork topped the gainers after the same same broker upgraded the stock.
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US close: Stocks close higher on hopes of improving US-Sino relations
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US stocks ended the session higher on Monday as investors awaited the outcome of the latest round of trade talks between the US and China.
At the close, the Dow Jones was 0.42% higher at 23,531.35, while the S&P 500 picked up 1.70% to 2,549.69 and the Nasdaq moved 1.26% firmer to 6,823.47.
While stocks managed to reverse losses seen at the bell, investors remained wary as officials from the US and China met in Beijing later for the first discussions between the two since Donald Trump and Xi Jinping agreed a temporary truce in December.
"These talks will have a positive outcome because both sides are trying to deal with the issue in an active and practical manner," said former vice commerce minister Wei Jianguo.
"“I'm not saying there could be positive results; I think there definitely will be."
On the macro front, activity in the US services sector deteriorated more than expected in December, according to data released on Monday.
The Institute for Supply Management's services index fell to a five-month low of 57.6 from 60.7 in November, missing expectations for a reading of 59.0.
The non-manufacturing business activity index slipped to 59.9 from 65.2 in November, reflecting growth for the 113th consecutive month.
The new orders index printed at 62.7 in December from 62.5 the month before, while the employment index fell to 56.3 from 58.4. The prices index came 57.6 compared from 64.3 in November.
Respondents indicated that there is still concern about tariffs, despite the hold on increases by the US and China. Also, comments reflected that capacity constraints have lessened but employment-resource challenges remain.
Meanwhile, the government shutdown entered its third week. Trump promised over the weekend to build his Mexico border wall out of steel as a compromise and repeated his threat that he may seek the necessary funding by declaring a state of emergency.
Elsewhere, West Texas Intermediate closed 1.46% higher at $48.66 a barrel, while Brent Crude improved 0.81% to $57.52.
The USD slipped 0.36% against the GBP to 0.7832.
In corporate news, Eli Lilly closed 0.54% lower after it said earlier that it had agreed to buy biopharmaceutical company Loxo Oncology for about $8bn in cash. The price represents a 68% premium to Loxo's closing share price on Friday. Loxo soared 66.33% in the session.
Utility operator PG&E Corp shares tumbled 22.34% following reports that the company is exploring a bankruptcy filing and asset sales and Sears sunk 9.30% after it was revealed that chairman Eddie Lampert's rescue bid had been unsuccessful.
Elsewhere, medical implant devices manufacturer Abiomed picked up 0.43% following the release of its third-quarter numbers and steel and metal manufacturer Commercial Metals closed 5.57% weaker after its first-quarter earnings.
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Tuesday newspaper round-up: Housing, Barclays, Samsung, China-US talks
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England must launch the biggest council and social house building drive in its history to rescue millions of people from a future in dangerous, overcrowded or unsuitable homes, a cross-party commission has told the government. More than 3m new social homes are needed in the next 20 years, more than were built in the two decades after the end of the second world war, according to a year-long housing commission launched in the wake of the Grenfell Tower disaster. Its commissioners include the former Conservative party chair, Sayeeda Warsi, the former Labour leader Ed Miliband and the former Conservative Treasury minister and Goldman Sachs chief economist Lord Jim O’Neill. – Guardian
Barclays is being threatened with a boardroom shake-up after an activist investor announced plans for a shareholder vote on the bank’s leadership. Edward Bramson, who has spent about £900m building a 5.5% stake in Barclays through his investment vehicle Sherborne Investors, told his own shareholders that a vote was necessary, given that “consistent engagement” with Barclays had failed to yield results. - Guardian
Samsung's profits have dropped by almost 30 per cent due to a global fall in demand for microchips, the company has warned. The Korean electronics giant said its operating profit in the last three months of 2018 was 28.7 per cent lower than the same time the previous year, one of the worst fourth-quarter performances in its history. - Telegraph
The boss of Laing O’Rourke, the country’s biggest privately owned contractor, has urged the Government to better support the industry after striking a painful deal with lenders to safeguard of the future its 15,000 workers. After months of intense negotiations, the Crossrail and Hinkley Point C builder has agreed a refinancing that sees banking facilities put in place until 2022. - Telegraph
The head of the World Bank quit unexpectedly yesterday, leaving President Trump to pick a new face for one of the most important roles in global finance. Jim Yong Kim, 59, said that he would leave the Washington-based organisation on February 1, three years before his term was due to expire, to join a private infrastructure investment firm. - The Times
Beijing has expressed hope that it can reach a trade deal with Washington and defuse the dispute between the world’s two largest economies as officials hold face-to-face talks. China said that it had “firm confidence” in its economy yesterday after President Trump claimed that its weakness had forced the country to the negotiating table. - The Times
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