Global equity markets are shining with the Japanese Nikkei hitting an 8-month high, Chinese shares on course to make their biggest weekly gains in 2 years, and a strong earnings outlook expected to continue.
US stock market also looks to continue it's march to record highs are strong fund inflows support the market. Figures released on Thursday by EPFR Global quoted a $14.5bn inflow.
The Hong Kong dollar (pegged to that of the USD) strengthened early Friday ahead of the US Federal Reserve meeting next week, and an expected rise in interest rates.
Brent crude has its eyes on $80 a barrel and is currently trading at its highest level in 4 years, all despite efforts of Trump's Tweets for OPEC to "get prices down now".
Crypto exchanges have hit back at a damning NY Attorney General report. Assets in the sector have rallied over the last session with bitcoin up around 5% in the last 4 days, and ether pushing a 17% gain in the same time period.
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questions to our expert panel now! Asian overnight: Asian markets are back on a positive footing, with the Chinese indices leading the gains amid widespread upside. This week has largely seen the markets take an optimistic outlook to US-China trade talks, and the gains seen overnight are an extension of that. On the data front, Japan was the centre of market focus, with national core CPI rising to 0.9% (from 0.8%), while the flash manufacturing PMI rose less than expected to 52.9 (from 52.5). Oil prices were mixed after falling in the previous session as President Donald Trump urged OPEC to lower crude prices ahead of its meeting in Algeria this weekend. For many industrial buyers and energy companies out there it seems they are cautious and possibly expectant of higher prices in the future.
UK, US and Europe: New data out recently has shown that the US has become the EU's largest supplier of soyabeans, with nearly 1.5 million tonnes supplied in the last quarter. This shows an increase of nearly 130% compared to the same period last year. This is seen as important by both Brussels and Trump, as it featured prominently in the President's plan for improving US-EU relations. Looking forward this could signal a success for both sides, as continued efforts to "reduce barriers and increase trade in services, chemicals, pharmaceuticals, [and] medical products".
Europe is ending the week in busy fashion, with a raft of eurozone PMIs released throughout the morning. Manufacturing and services PMI readings from the likes of France, Germany, and the eurozone should keep the euro in focus. In the US session, we also see those same PMI readings released later in the day. Also keep an eye out for the Canadian retail sales and CPI numbers. Finally, given the current events surrounding oil, Trump and OPEC it's going to be increasingly important to stay up to date with figures out on the black gold. Baker Hughes should keep you in your chairs at 6pm BST today.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
8am – 9am – French, German, eurozone mfg & services PMI (September, flash): French services PMI to rise to 56.1 from 55.4, and mfg fall to 53.4 from 53.5. German services PMI to rise to 55.1 from 55 and mfg to fall to 55.4 from 55.9. Eurozone services PMI to hold at 54.4 and mfg to fall to 54.4 from 54.6. Markets to watch: eurozone indices, EUR crosses
1.30pm – Canada CPI (August), retail sales (July): CPI to be 2.8% YoY from 3% and 0.2% Mom from 0.5%. Core CPI to be 1.5% YoY from 1.6%. Retail sales to rise 0.4% MoM from -0.2%. Markets to watch: CAD crosses
2.45pm – US mfg & services PMI (September, flash): mfg to fall to 53.8 from 54.7, and services to fall to 53.6 from 54.8. Markets to watch: US indices, USD crosses
Corporate News, Upgrades and Downgrades
Smiths Group said pre-tax profit for the year was down 28% to £435 million, while revenue fell 2% to £3.21 billion. Operating margin fell 110 basis points to 16.9%.
SIG reported a 28% drop in operating profit, to £26.9 million, while revenue was down 4% to £1.38 billion. Poor weather in the UK hit performance, but the trading environment was better in mainland Europe and Ireland.
EDF upgraded to neutral at Exane
Enel upgraded to outperform at Exane
Maersk upgraded to buy at HSBC
Endesa downgraded to neutral at Exane
Suedzucker downgraded to sell at Bankhaus Lampe
Verbund downgraded to underperform at Exane
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Submit your questions now! In October we will be hosting a number of live chats and discussion dedicated to the world of currency trading and the foreign exchange market. Each #IGFXChat will focus on a unique topic, relevant to the macroeconomic landscape today.
These topics will include; the ongoing US - Sino trade war, Trump's protectionist tariffs, and the renminbi; the uncertainty surrounding Brexit and any ongoing EU negotiations; and finally the recent sell side pressure affecting emerging market currencies and their local economies.
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Each #IGFXChat discussion will be hosted by our own IGTV presenters along with an elite group of influencers, analysts, traders, and market commentators. We will broadcast LIVE within the IG dealing platform, on IG Community, and via our broader social media platforms such as Facebook and YouTube.
Our first #IGFXChat will focus on...
What effect will the trade war have on forex markets?
Possible effects of Trump’s policies
Possible effects of Chinese, EU, G7 reactions, etc
Chinese renminbi – how will its valuation develop, will China continue to exert control over its value, etc?
Key pairs to watch over next 12 months
The most important part of the #IGFXChat will be you! We want to hear your questions so we can put them to the panel, opening up a two way channel between you and a group of experts which you may not usually access. The first two guests will be Raj Dhall at tradingview.com and Samuel Morton at lovethepips and forexcfdsignals.com.
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Stocks pull back in the Asian overnight market after a tepid close of Wall Street last night.
Bellwether metals copper and zinc, along with other industrial metals, continue their rally as investors and traders focus on increasing demand rather than US-Sino relations.
Rio Tinto announced a $3.2bn share buyback scheme, and whilst the Anglo-Australian miner saw 3.2% gain the ASX didn’t follow suit and ended down slightly. Potential swings on the UK Rio listing on the open.
In EM currencies, the SA Rand rallied on Wednesday after consumer price growth slowed according to inflation data. This comes ahead of the rate decision today - one to keep an eye on amid potential volatility.
A solid reading on New Zealand’s economic growth GDP figure pushed the NZ dollar higher.
US dollar index was down around 0.1%, with the euro trading at around 1.168 USD whilst 10 year treasuries are up around 10 basis points in the last week.
US crude inventories saw a three and a half year low yesterday whilst gasoline saw a pullback. Both energies were up on the news and have seen consolidation since. This could be one to watch today for any profit taking or movement on the back of trade talk news.
The president of the Financial Action Task Force, the global anti money laundering body, has said he’s optimistic about agreeing a set of standards for AML procedures applied to crypto and virtual currencies.
Retail Sales in the UK, US initial jobless claims, and the EU press conference are the macro data areas to look out for today.
Asian overnight: A much less decisive and convincing session overnight has seen Asian markets largely exhibiting moderate gains in a day that has seen them oscillate around the market open level. The one loser on the session came from Australia, with the ASX 200 falling after a report from the RBA said that in an all-out trade war, the AUD could significantly strengthen. The NZD was one of the strongest currencies of the session, following an improved GDP number of 1% for Q2.
UK, US and Europe: Theresa May stated yesterday that she will not accept Brexit offers that treat Northern Ireland as a separate customs territory, after the EU proposed to keep the region within its customs union and single market. Further to the Financial Action Task Force statement on cryptocurrencies discussed above, the UK's Treasury Committee has announced that the country could soon implement regulatory reforms for Cryptocurrencies, to address poor security, extreme volatility and excessive anonymity. The proposed aim is to make the UK a legitimate home for crypto trading and become a major trading centre.
Looking ahead, the UK is back in focus with the release of the latest retail sales number. Volatility over Brexit has been influencing the pound and thus traders should also watch out for any further comments from the UK or EU. In the afternoon, keep an eye out for the US Philly Fed manufacturing index and existing home sales. Meanwhile, the eurozone comes back into play, with consumer confidence and an appearance from Bundesbank President Weidmann later in the day.
South Africa: Global markets are giving ambiguous signals today for the JSE as US Index futures and Asian markets show a mix off marginal gains and losses this morning. There is little in the way of new news to guide markets today although South African traders and speculators will keep a watchful eye on the Reserve banks monetary policy meeting this afternoon.
Lending rates are expected to remain unchanged, although there remains a possibility of a marginal rate hike. The rand remains firm leading into the news event. Tencent Holdings is up 0.25% in Asia suggestive of a marginally positive start for major holding company Naspers. BHP Billiton is trading 1.14% higher in Australia, suggestive of a positive start for local resource counters.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
9.30am – UK retail sales (August): sales to rise 0.2% MoM and 2.7% YoY, from 0.7% and 3.5% respectively. Markets to watch: GBP crosses
1.30pm – US initial jobless claims (w/e 15 September), Philadelphia Fed index: claims to rise to 208K from 204K, while the Philly Fed index rises to 15 from 11.9. Markets to watch: US indices, USD crosses
3pm – eurozone consumer confidence (September): confidence index to rise to -0.7 from -1.9. Markets to watch: EUR crosses
3pm – US existing home sales (August): forecast to rise 0.6% MoM from a -0.7% fall. Markets to watch: US indices, USD crosses
Corporate News, Upgrades and Downgrades
Rio Tinto has announced details of its $3.2 billion share buyback, combining an off-market tender of $1.9 billion and additional on-market purchases.
Stobart said that passenger numbers at its London Southend airport rose 37% for the first half.
Kier Group reported a 9% rise in underlying pre-tax profit for the full year, to £137 million.
Diageo said that the new financial year had begun well and that performance remained in line with expectations. Heightened exchange rate volatility is expected to hit operating profit for the year by around £45 million.
Aveva upgraded to overweight at Barclays
Weir upgraded to overweight at Morgan Stanley
Bayer upgraded to buy at Citi
Proximus upgraded to buy at Citi
Essity downgraded to neutral at Goldman
Nokian Renkaat downgraded to sell at Carnegie
Telenet downgraded to neutral at Citi
Telefonica Deutschland downgraded to sell at Bankhaus Lampe
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
ASX yesterday: SPI futures are indicating a 5-point jump at the open for the ASX200, as traders continue to ride the wave of relief washing-over global markets. The boost in global commodity prices has underpinned the bounce in the ASX, with the materials and energy sectors leading the charge higher. Commodities markets maintained their run overnight, collectively climbing 0.76 per cent according to the Bloomberg Commodity Index, while the price of oil also threatened to challenge new highs, holding around the $US79 per barrel in Brent Crude terms. The dynamic reflects well the increased optimism around global growth since the anxiousness relating to the US-China trade war receded, translating consequently to a sharp pang of increased risk appetite for global investors.
ASX prospects: The curious point today however will be in the assessment of what ability the ASX200 has to push back toward decade long highs. Undoubtedly, the Australian share market has participated in the global bounce in risk appetite this week, but to a far lesser extent to other major global equity indices. This may well be because that although the ASX has pulled back some way from its recent decade long highs, it didn't suffer the same initial damage as other global indices did. The market is missing some of the drivers that fuelled the ASX200's rally, with the growth stock heavy healthcare space still lagging, and the lower Australian Dollar not attracting investors like it has (until lately) been.
Global equities: It means that there is the risk that the ASX200 is taking its turn at trailing behind the pack, especially if a firm lead from global indices can't be followed. European and North American markets built well upon the foundations established by Asian equities yesterday, particularly that set by the Nikkei, which challenged multi-month highs at 23,900. The FTSE and DAX added 0.4 per cent and 0.5 per cent during Europe's session, and the Dow Jones rallied 0.6 per cent during Wall Street's trade. Granted, the benchmark S&P500 only edged 0.1 per cent higher, weighed down by a pullback in the tech stocks that saw the NASDAQ lose 0.1 per cent, however both of those indices sit only modestly away from all-time highs.
China: The ingredient necessary to another breakout in global indices and the ASX200 may well hinge on sentiment regarding Chinese markets. Despite recovering considerable territory this week, adding to calls that China's indices have found a bottom, the overall trend for those markets remains in place. Using the CSI300 as the benchmark, yesterday's rally to 3312 places that index within touching distance of key resistance at 3400. Traders have opted to sell rallies on several occasions at that mark, reflecting doubts that Chinese equities are capable of a trend reversal in the short term. A breach and hold above that resistance line should be treated as a noteworthy shift in the view investors have on the Chinese market, and signal that broader global indices have scope to push higher.
Rates and bonds: A potential risk to the future strength of equities markets is the run higher in global interest rates. Even when the worst fears about the US-China trade war have prevailed over the last month, prices in international bond markets continued to slip, driven by the view that the US Federal Reserve can and will hike interest rates at the rate it desires. Interest rate traders have practically fully priced in an interest rate hike from the US Federal Reserve next week, with another hike in December priced at an 80 percent chance, and another 1 and a half priced in for 2019. The result has been a climb in US Treasury yields, with benchmark US 10 Year Treasuries now yielding about 3.07% - about 4 points shy of the yearly high.
Currencies: Of most concern to equity market bulls is that it appears this is a phenomenon no longer contained simply to the US: CPI data out of the U.K. last night showed a significant jump in inflation, printing at 2.7%, pushing up the likelihood of another rate hike from the Bank of England early next year. The Pound challenged levels above 1.32 after the release of UK CPI data, seemingly carrying the EUR with it, before both currencies retraced their gains, dragged down by lingering doubts about Brexit. The trade dynamic put more pressure on the US Dollar, dragging the USD Index through trendline support, and pushing up the price of gold back towards its resistance at $1207.
Australian Dollar: The weaker USD has aided a rally in the AUD, which, combined with Chinese Premier Li Keqiang’s comments yesterday that China would not look too weaponize the Yuan, has pushed the AUD/USD to around 0.7250 at time of writing. The Australian Dollar has been the trade-war risk proxy of choice for traders of late, naturally leading to a rally in the Aussie this week amid easing fears of an escalation in the spat between the US and China. It must be implored that the down trend is still intact for the AUD/USD and will likely remain so given the widening yield disadvantage between USD and AUD denominated assets. However, there is scope for a modest rally higher for the local unit to major resistance at 0.7310, a level that could come into the sights of traders if the NZD responds favourably to this morning’s New Zealand GDP print.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The rebound in Chinese stock markets has extended and US bond yields are steady after the market digested the trade tariff news. MSCI Asia-Pacific index up 0.95%, whilst the Japanese Nikkei rises 1.3%
A reclassification of the S&P 500 will see tech behemoth such as Facebook and Alphabet move from 'information tech' stocks into 'communication services' along with about a fifth of the index.
Oil prices are seen to consolidate after rally.
Cryptocurrency markets are holding steady, and with higher lows being made across the board this could signal a trend reversal for many technical traders.
UK inflation data is in focus today, likely to be closely watched as investors economic optimism hits a near seven year low.
Asian overnight: Asian markets continue to defy expectations, with gains throughout the region flying in the face of an intensified trade breakdown between the US and China. In a retaliation to the US decision to implement tariffs on $200bn of Chinese imports, China has now responded with further duties on $60bn of US imports. Chinese authorities have however said that they would not intervene in the currency market and have not yet removed themselves from upcoming bilateral talks on trade with the US. Despite both sides announcing new tariffs yesterday, the level of those levies are somewhat lower than expected, sparking a relief rally.
In Japan the BoJ decided to maintain a steady monetary policy, with the bank stating that they will maintain extremely low rates for an extended period of time.
UK, US and Europe: Looking ahead, the European session will focus on the UK inflation data, with CPI expected to reverse last month’s gain, with a tick lower to 2.4%. A similar move is expected with core CPI, where a shift down to 1.8% would help continue the downward spiral of 2018. CPI, which stands for Consumer Price Index, is a key measure of inflation for the UK and is used by the Bank of England in making interest rate decisions. The report tracks changes in the price of a basket of goods and services that a typical British household might purchase. An increase in the index indicates that it takes more Sterling to purchase this same set of basic consumer items
The afternoon brings building permits and housing starts from the US, while an appearance from Mario Draghi and the crude inventories means that we should have a sufficient amount of data to shift the needle.
South Africa: The Jse Allshare index is expected to post gains this morning following its international counterparts. The rand is holding on to short term gains while commodity prices tick higher on the back of a weaker dollar. Tencent Holdings is trading 2% higher in Asia suggestive of a positive start major holding company Naspers. BHP Billiton is up 2.89% in Australia suggestive of a positive start for local resource counters.
Economic calendar - key events and forecast (times in BST)
9.30am – UK CPI (August): CPI to rise 2.7% YoY from 2.5%, and 0.3% MoM from 0%. Core CPI to be 2.1% YoY from 1.9%. Markets to watch: GBP crosses
1.30pm – US housing starts & building permits (August): permits to fall 0.8% MoM and starts to rise 0.3%. Markets to watch: US indices, USD crosses
3.30pm – US EIA crude inventories (w/e 14 September): stockpiles forecast to fall by 1.2 million barrels, from a 5.3 million barrels drop a week earlier. Markets to watch: WTI, Brent
Source: Daily FX Economic Calendar
Corporate News, Upgrades and Downgrades
Stagecoach said that it has made a good start to its financial year, with forecasts unchanged despite a mixed performance, as revenue weakened in North America but UK rail revenue rose.
Kingfisher said that underlying pre-tax profit fell 14.8% to £375 million for the first half, while first-half gross margin fell 40 basis points. The firm said it remained on track to hit strategic milestones
NEX will pay $50 million to settle claims in the US relating to interest rate benchmark manipulation.
BAT upgraded to hold at DZ Bank
CNP Assurances upgraded to hold at HSBC
Commerzbank upgraded to outperform at RBC
Concentric upgraded to buy at SEB Equities
Castellum downgraded to sell at DNB Markets
Coloplast downgraded to hold at ABG
Credit Agricole cut to neutral at Mediobanca
Fabege downgraded to sell at DNB Markets
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
It was a choppy day in markets as sentiment vacillated in response to the latest escalation in the US-China trade war. US President Trump made traders wait a little longer than was flagged for his administration's trade announcement, leaving it until well after Wall Street's close to drop the news. Upon the eventual release, initial reactions were unfavourable: though the $US200bn worth of tariffs would go ahead on September 24th at the rate of 10 per cent, this will be upped to 25% come the start of next year is China refuses to come to the negotiating table. Markets viewed the White House's position as much more hostile than expected and began to price in that an equally aggressive reaction from the Chinese would be forthcoming.
Relief rally: Perhaps to Chinese policy makers' credit, trader's worst fears didn't materialise. The gap in the latest chapter in the US-China trade war that has generated so much uncertainty is not what the White House may do, but what the Chinese may do in response. In short: will China's retaliation spark an out of control escalation in this trade war? Though it took until the close of the ASX200 to come, some measured responses from the PBOC and Chinese bureaucrats throughout the Asian session proved enough to convince traders that the situation is under control. Hence, by the time the Chinese announced they would retaliate in line with previous threats of $US60bn worth of tariffs on American goods overnight, traders (for now) judged they had enough information to be comfortable to jump back into the market.
ASX: So that's the state of play (broadly speaking) as we look toward the day ahead. SPI futures are indicating a jump at the open of about 28 points, on the back of a day that the ASX200 shed a touch shy of 0.40 per cent. A bounce is on the cards today for the local market, with energy, materials and health care stocks the ones to watch to drive the recovery. The prevailing sense of relief that looks to drive a synchronised run higher in Asian equities today begs some curious questions for the ASX: the index has found itself comfortable in a range between around 6130 and 6190 in recent weeks, following a bout of risk-off profit-taking when trade war fears set-in. If the trade war risks have diminished, can the ASX200 restart its run higher? A move back toward 6220 in the final days of the week may signal the affirmative.
China: The boost in risk appetite bodes well for hitherto embattled Asian equity indices today. Chinese stocks made a late run yesterday afternoon and appear likely to continue the charge in the day ahead. Investors have been reluctant to jump into China’s markets because of trade wars fears and concerns around the country’s fundamental growth, so it remains a matter of interest as to whether the last 24 hour’s developments will shift the dial on this view. Commodities prices – a strong proxy for traders’ attitude towards Chinese growth prospects – generally lifted overnight, boding well for Asian equities today. A change of trend in China’s markets will be hard earned but look for a hold above 3400 in the CSI300 in the days and weeks ahead to signal a change in tide.
US Session: Wall Street has provided a strong lead for the ASX200 to follow today, though it must be said Australian shares have decoupled somewhat from their US counterparts recently. The tech stocks led US shares higher, which had been sold-off rather aggressively in the last week or so because of fears that the Chinese may target tech-company’s supply chains. The NASDAQ was up 0.76 per cent for the day as a result, underpinning a lift in the S&P500 of around 0.54 per cent. Speaking of the benchmark S&P500, today’s activity puts that index back within reach of record highs: it came within a tight 5 points away from it overnight, so provided (at the very least) a neutral tone of trade in the day ahead, this milestone may be reached once more in the next US session.
Japan: The news flow for the Asian session today looks light, though of course it must be said we are only a Tweet away from that changing. The major event on the calendar will be the meeting of the Bank of Japan, which of course will keep their policy settings on hold. Lost in the back drop of trade war doom-and-gloom over the last week has been the remarkable rally in the Nikkei, which has managed to hold above resistance/support at 23,000. The rally has been spurred by a recent run of strong Japanese data, that has supported the contention that Japan’s economy is in a state of improvement. As such, the BOJ’s commentary out of its meeting today may be influential, as the Nikkei eyes a run to resistance at 23,500.
Oil: A story largely removed from matters relating the Asian region and the US-China trade war was developments in oil prices. The black stuff spiked during the European session overnight, after news was reported that Saudi officials had expressed that it would be comfortable with Brent Crude prices over $US80 per barrel. A perfectly rational response from a country which stands to benefit from higher oil prices, the statement planted the idea in the minds of commodity traders that if global supply and production concerns persist in oil markets, that the Saudi’s would be less likely to boost output in order put downward pressure on prices. The $US80 mark will remain a considerable level of resistance for Brent Crude even considering this story and ahead of US Crude Oil inventories data tonight, but perhaps a breach of this zone could turn that price into somewhat of a pivot point, with the next resistance level from there around $83.75.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Trump to impose an additional 10% tariff duty on China rising to 25% next year if no deal is reached.
China's yuan down on the back of trade war talks, whilst a stimulus package helps support the equity market.
Gold's typical 'safe haven' status isn't re enforced this time around, with flow seen into the USD over the precious metal.
Nickel, aluminium and bellwether metal copper hit on the LME by the $200bn tariff. Oil drops on the same news.
Mining shares also hit as a result and its likely we’ll see some FTSE and European shares gap down on the open..
In the EM space political uncertainty is driving down coffee prices, whilst the Indian rupee drops to near record lows despite PMs best efforts.
Elon Musk's SpaceX has named a Japanese billionaire as its first tourist they’ll fly around the moon.
Saudi Arabia’s sovereign wealth fund has invested $1bn in a Tesla rival, Lucid motors.
Asian overnight: Asian markets performed remarkably well overnight, with the Hang Seng and ASX 200 providing the two sour notes on an otherwise resilient session. Chinese markets rose despite Trump implementing 10% tariffs on $200bn worth of Chinese goods which will will start on September 24. The decision comes in spite of China's warning that they would not engage in scheduled trade talks if the US implemented these tariffs. This would rise to 25% next year if no deal is reached, and the US has further warned that if China retaliates, it would pursue tariffs on another $267bn worth of imports from China.
To an extent this largely writes off any hopes of a resolution in the near-term and instead heightens the risk of Chinese retaliation. However it seems today’s news was largely baked into the price, thus muting the effect. While US markets were weaker overnight, US Index futures are trading marginally firmer this morning and Chinese equity markets significantly firmer today. Elsewhere, the RBA minutes pointed towards a bank which has no inclination to raise rates anytime soon.
UK, US and Europe: Looking ahead, there are precious few notable economic releases of note, thus shifting the focus back onto the Chinese trade concerns alongside Brexit.
South Africa: Commodity prices are under some pressure this morning while the rand has managed to claw back some further strength against the greenback. BHP Billiton is trading 0.4% lower in Australia suggestive of a weaker start for local diversified resource counters. Tencent Holdings is up 0.2% in Asia, suggestive of a marginally positive start for major holding company naspers.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
Corporate News, Upgrades and Downgrades
Spire Healthcare said that pre-tax profit fell 7.9% for the first half, to £8.2 million, while revenue was down 1.1% to £475.6 million. Full-year guidance was also cut, to £120-£125 million.
Ocado reported an 11.5% rise in retail revenue for Q3 to £349 million, while average orders per week rose 11.4% to 283,000.
Centrica upgraded to buy at Goldman
Fresnillo upgraded to top pick at RBC
Merlin upgraded to buy at SocGen
Polymetal upgraded to outperform at RBC Investec maintain buy on Barloworld with a target price of 14400c
Investec upgrades Distell to buy with a target price of 15000c
CYBG downgraded to hold at Berenberg
NCC downgraded to hold at SEB Equities
Vifor Pharma cut to neutral at JPMorgan
Moody's has placed MTN on review for downgrade
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
US President Trump’s administration has announced the next round of tariffs on $US200bn worth of Chinese imports. The tariffs will be at a rate of 10 per cent, increasing to 25 per cent by the end of the year. The tariffs will be implemented on the 24th of September. The Chinese have stated that they will not come to the negotiating table if this second round of tariffs were implemented. We will be awaiting their response in the coming days.
The price action quoted below is evolving, but there is considerable risk-off behaviour and the day ahead is poised for heavy selling while market participants assess the possible impacts of the latest trade war escalation.
ASX: SPI futures are pointing to a slight dip at the open for the ASX200 of about 5 points. In the face of a day of thin trading courtesy of it being a Monday, combined with a bank holiday in Japan, the Australian share market did well to avoid the sell-off that gripped Asian equities yesterday. Fears relating to slower global growth showed up in the commodity sensitive materials sector and the growth-stock-heavy health care space, but despite this, the broader Index managed to push higher to settle slight above last week's high of 6280. Given the geopolitical risks constricting market sentiment today, a further push above that mark seems unlikely. But if clear air can be found, the next test for the ASX and its budding recovery sits around 6205.
US Markets: Wall Street has demonstrated weakness not witnessed for several weeks. Having bucked the global trend for some time, price action in US indices overnight displayed signs that traders are becoming wary of the consequences of heightened hostility between the US and China. Tech stocks led run lower overnight, resulting in 1.43 per cent tumble in the NASDAQ and a 0.56% fall in the S&P500. The benchmark S&P500, as a barometer for US equities, is still in a relatively strong position, remaining close to the top of its upward trend channel. However, according to IG data, sentiment is against the index, with 60 per cent of traders short on the market, exposing the 2870 support level as a noteworthy pivot point.
Asia: Trade within the broader Asian region to start the week has proven a dour affair. The trade war has cast a shadow over Asian indices, with any counter arguments around attractive stock valuations, or planned intervention from policy makers doing little to staunch sell-offs in these markets. The CSI300 is primed to hit new lows, opening today's session 13 points above its 52-week low, and with futures markets indicating a near 1 per cent drop at the open. The Hang Seng is showing some resilience, following a day that saw that index unwind much of last week's recovery rally. The interesting one today will be the Nikkei, which comes back on line after a public holiday yesterday and is showing signs of a noteworthy jump at the open despite a safe-haven play into the Yen overnight.
Emerging markets: The bearishness weighing-on major developed markets will keep pressure on vulnerable emerging markets. Fears that the Chinese economy may falter were behind the renewed sell-off, driving emerging market equities down 1.2 per cent yesterday. Losses in emerging market currencies were relatively contained considering this, but that was largely owing to a weaker greenback. India’s Rupee suffered a fresh bout of selling, after Indian policy makers efforts to stabilize the country’s financial markets failed to assay investors’ concerns about financial stability in the Indian economy, translating into increased selling pressure on currencies ranging all the way from the Philippine Peso to the Turkish Lira.
Commodities and safe havens: The instability in emerging markets coupled with the effects on global growth of the US-China trade war has hit commodities and prompted a play into safe-haven assets. Copper prices maintained its downward trend to start the week, while oil prices also appeared to manifest demand-related concerns. The Bloomberg Commodity index was down 0.4 per cent at the end of the North American session, portending further losses to materials stocks today. Gold prices rallied back towards resistance at $US1207, as traders sold out of the US Dollar and avoided a play into US Treasuries, preferring to park safe-haven funds in the JPY, EUR and GBP. The trade dynamic led to a paradoxically steady AUD/USD overnight, trading at around 0.7180 for much of the North American session, though it must be noted the local unit slipped against most other major currencies.
RBA Minutes: The major event today during the local session will be this morning’s release of the minutes from the RBA’s most recent meeting. Few surprises are expected from the minutes, with recent economic data doing most of the talking for the Australian economy of late. Interest traders have kept wedded to the idea that interest rates will remain on hold until early 2020, something the RBA has done little to contradict in recent months. As is always the case, today’s minutes will be perused by traders for fresh insights into the hot points relating to the domestic economy’s health: this time around, that will likely come in the form of discussion about out of cycle rate hikes from the major banks and concerns about the strength of Aussie households. A major response to today’s news looks unlikely but watch for moves in the Australian Dollar with the realms of support at 0.7150 and resistance at 0.7200.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Whilst the Tokyo markets are on holiday, most other Asian equity markets slip on reports that Washington are continuing their tariff roll outs with a focus once more on Chinese imports. Thin liquidity due to the closed Japanese market didn't help, however moves in currencies seem minor.
Dollar steady against a basket of major currencies, whilst gold nudges up.
Oil prices have generally eased as the trade war row potentially distorts the demand outlook.
The cryptocurrency market is seeing mixed signals as the total market cap holds a strong position over the weekend. Tim Draper, Silicon Valley venture capitalist, has predicted an $80 trillion market cap in the next 15 years, whilst others point to stronger arguments in favor of an ETF market.
Asian overnight: A largely bearish start to the week has seen Chinese and Hong Kong stocks trading sharply lower, with the Australian ASX 200 pushing back in the opposite direction in the absence of Japanese markets whom are on a national holiday. Weather related crises throughout the world have been wreaking havoc on a number of countries, and the landfall of Typhoon Mangkhut on Hong Kong and Chinese land has dented confidence in the region. Damage to the Macau area meant that we saw a sharp decline in casino stocks. Meanwhile, news that China could actually reject the latest trade talk proposals given the likely imposition of tariffs on another $200bn of goods, risk sentiment as a whole isn’t great in the region.
UK, US and Europe: Looking ahead, we have a day with precious few hugely notable releases, with the eurozone final CPI grabbing the headlines in the morning. For the afternoon, look out for the US empire state manufacturing survey, as we start the week off in a somewhat slow fashion.
South Africa: Weaker US Index Futures and Asian equity markets this morning are suggestive of a slightly softer start for the JSE All Share Index. The rand along with its emerging market currency peers has softened against the dollar, while metal prices are also trading lower this morning. BHP Billiton is 0.66% lower in Australia suggestive of a weaker start today for locally listed diversified miners. Tencent Holdings is down 2.55% in Asia, suggestive of a softer start for major holding company Naspers.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
10am – eurozone inflation (August): forecast to rise 0.2% MoM from -0.3%. Markets to watch: EUR crosses
1.30pm – US NY Empire State mfg index (September): index to fall to 23.6 from 25.6. Markets to watch: US indices, USD crosses
Corporate News, Upgrades and Downgrades
Prudential said that it expects its demerged UK investments business, M&G Prudential, to hold around £3.5 billion of subordinated debt.
Sirius Minerals has signed a take-or-pay supply agreement with Brazilian firm Cibrafertil, for the supply and resale of potash into Brazil and other countries.
Dairy Crest expects first half profits and revenue to be ahead of last year, due to a strong performance from its Clover and Cathedral City brands.
Boohoo has appointed Primark’s chief operating officer John Lyttle as its new CEO.
Immofinanz Upgraded to Hold at Baader Helvea
Concentric Upgraded to Buy at Kepler Cheuvreux
Prysmian Downgraded to Neutral at Goldman
Hays Downgraded to Hold at HSBC
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The economic calendar is relatively light, and markets await guidance from US President Trump about his intentions regarding the next round of tariffs on China. This will likely be the headline theme this week with sentiment probably swinging on how this narrative unfolds. There isn’t a terrific lead being handed to us from Wall Street, which demonstrated its fundamental resilience at the end of last week’s trading but didn’t truly threaten new all-time highs. An easing of fears around emerging markets will support market-bulls, courtesy of the Central Bank of Turkey’s proactive policy stance last week, however the structural concerns relating to emerging markets remain. For global markets, early indications are that this week may be defined by how well traders can traverse these various risks, particularly in the ever-vulnerable Asian region.
ASX: Against this backdrop, SPI futures are currently indicating a 6-point jump for the ASX200 at the open. The Australian market performed a tepid recovery at the end of last week, closing trade a skerrick below the week’s high. Ultimately the market’s performance boiled down to strong activity in the energy sector, thanks to Hurricane Florence and a spike in oil prices, coupled with a slight recovering in mining and healthcare stocks as global growth fears waned. The financials struggled again, with a growing chorus calling the banks lower amid tighter credit markets, a local property slowdown and a squeeze on margins from higher funding costs. The capacity apparently exists for the local market to push higher if geopolitical risks diminish, but perhaps some play towards resistance at 6220 is required first to demonstrate signs of fundamental strength.
US Shares: Wall Street stands out currently as a lone beacon across global equity indices. US traders effectively shrugged off news during the last North American trading session at the end of the week that US President Donald Trump was instructing his administration to push ahead with the next round of proposed tariffs on Chinese goods. Though none of the major indices really managed to press forward, a more-or-less flat day was a good outcome for US markets, particularly given that the only major event of fundamental significance was the release of below forecast US Retail Sales figures. Early indications inferred from futures markets suggest that another flat day awaits US equities upon the North American open, perhaps a sign of wariness from traders of challenging new all-time highs against a background of economic uncertainty.
Rates and Bonds: Signs of optimism are popping up in other asset classes, with US Treasuries gradually pricing more interest rate hikes from the US Federal Reserve. The yield on benchmark 10 Year Treasuries tipped above 3 per cent on Friday, while the 2 Year equivalent climbed to new multi-year highs around 2.78 per cent, taking the spread between those two assets back to 22 points. Interest rate traders are now pricing in 45 basis points of rate hikes before the end of 2018, and another 1 and a half hikes from the Fed for 2019. As markets prepare for next week’s meeting of the Fed, talk will turn to how sustainable long-term bond yields above 3 per cent are for US Treasuries, given the growing headwinds to global growth. Expect some buying of Treasuries with yields at this level throughout the week, as macro watchers assess the 10 Year’s capacity to challenge new highs around 3.10%.
Currencies: Rising US bond yields appears likely to underpin US Dollar strength in the medium to long term. The greenback fell over the course of last week's trade, primarily due to rallies in the Pound and Euro on the back of easing Brexit fears, along with upbeat assessments from the BOE and EXB regarding their respective economies. A boost to risk appetite is keeping the AUD/USD from re-testing recent lows, although the pair has repeatedly sold off at the 0.7200-mark, indicating further falls in Aussie Dollar are likely. Most notably, it's activity in the USD/JPY that tells the richest story, with the greenback climbing back above 112 against the Yen, as traders unwind safe-haven positions. The softer Yen augurs well for Asian markets to start the week, particularly the Nikkei which appears primed to push further above support/resistance at 23,000.
Asian equities: Asian markets will continue to be a point of fascination for analysts this week, as investors await to see how this technical bear market in Chinese and Hong Kong indices unfolds. Assessing last week's price action, it looks as though there is more at play in Chinese equities than simply matters relating to trade war concerns. For one: Chinese indices didn't really participate in last week's Asian relief in quite the same fashion as their Hong Kong and Japanese counterparts. It reveals concerns about the fundamentals of China's economy above and beyond the impacts of looming US tariffs. Friday's massive data dump from China may have provided a clue into the situation at play: Fixed Asset Investment is continuing to trend lower, demonstrating diminishing fundamental activity within the Chinese economy.
Commodities: The general rally across the Asian region bode well for commodities markets, with industrial metals rallying off recent lows because of greater optimism regarding global growth. Copper was one of the biggest beneficiaries of this shifting sentiment, although that metal did sell off considerably as it approach the $US6000 level. In other commodities, Brent Crude took a break from its dance with the $US80 handle, as the severity of Hurricane Florence diminished; gold prices fell back to around $US1200, failing to break resistance at $US1207 despite the slightly weaker greenback; and iron ore is trading back around $US68 as traders eye the $US70 mark once more.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Is There an Effort to Keep Markets Uneasy in Trade Wars?
How many times does something unusual have to occur before it is considered a planned? I have noted a number of times over the past month that some unexpected policy development was announced hours before the markets closed for the weekend. There is an unspoken commitment by central bankers and global leaders to prevent volatility in their respective financial markets. Volatility is the general definition of risk, and there is a clear connection between financial market and economy. In other words, no one wants to trigger speculative rout that could turn into tangible economic pain. And yet, that typical preservation of self-interest doesn’t seem to worry some of those in power looking to stir norms.
One of the more common culprits of this push against norms is US President Donald Trump and those in his administration. Announcements of new tariffs on Fridays are now commonplace. And this past week would not deviate from that new norm. Two people in the administration with knowledge of the plans said the President intended to push forward with the proposed $200 billion increase in tariffs on Chinese goods despite the effort to revive talks this past week. This is not exactly surprising given the United States negotiation approach of late. They seem to prefer discussing terms after exerting pressure on their counterparts in an effort to leverage a more favorable outcome. It is also the case in this instance that the remarks are not official – as in they do not come from the President himself. Typically, Trump prefers to announce such things himself to signal he retains final say over such matters.
Leaks are another increasingly common feature of the US political landscape which unexpectedly adds more uncertainty to an otherwise surprise-oriented policy approach – but at least one where we know to focus for answers. Whether intentional or not, the major announcements in policy from the US and other major economies into the twilight hours of the week creates a resting state of increased uncertainty for financial markets. We do not need any more reason to question our already excessive exposure to risky assets between the dependency on excessive monetary stimulus which is starting to correct, exploding levels of debt, increased speculative leverage and obvious efforts by superpowers to promote local growth through policies that curb others’. A frequency of last minute and troubling headlines just before the markets close is yet another reason traders could naturally want to curb their exposure.
Evaluating Fundamental Themes for Both Their Probability and Pace of Progress
Trading fundamentals can be overwhelming for many. While there are many different motivations for market participants the world over to place or remove exposure, there are typically key reasons that draw many – if not the majority – to alter their views in tandem. If there were a first rule for trading using fundamentals, I would say it is to first establish what is most important to the market-at-large. Another functional application of this broad analysis technique (perhaps rule number 2) is to establish the nature of the theme or event itself. Is it complex or straightforward? Is there a distinct time frame for it to render its verdict or is the outcome something that can be debated through time?
Depending on the circumstances surrounding these fundamental matters, we can determine what kind of contribution they can make towards our trading – or how effectively they can otherwise complicate the opportunities that may otherwise seem complete. We can use examples to illustrate. The Federal Reserve’s next rate decision is scheduled for September 26th. There is clear anticipation for yet another 25 basis point rate hike by the policy authority with swaps pricing in nearly 100 percent probability. That is clear time and outcomes (hike or not). Such simplicity can make for straightforward Dollar or risk trends – though it will also drain the market-moving potential of an outcome that meets deeply discounted scenario. There is still complication in the forecast for another hike around December, pace in 2019, concern over external factors and more; but those clearly are not the primary interest.
A significant step up in terms of fundamental complication are the ongoing NAFTA negotiations between the US and Canada. While there have been a few dates of confidence thrown out by officials, there is no definitive end date. There is also substantial discrepancy in the outcome for these talks such that a compromise or dissolution of trade relations can render significant market moves. This is an even that is far more difficult to predict for timing and outcome, but it renders far more market movement. And, then there are those events that can continue without resolution for considerable time and the full impact cannot be readily be predicted until long after it is implemented. That is the situation with an event like the US-China trade wars. There are no milestones for furthering the tensions or reducing them and it can prove a systemic threat that directly leads to a global recession and/or financial crisis. Yet, without clear guidelines, the practicality of trading around it is exceedingly difficult.
And Now, the Central Banks with Failing Credibility
This past week, the European Central Bank (ECB) and Bank of England (BoE) delivered their respective monetary policy decisions. These are important policy groups whose decisions carry far beyond their respective economies. The ECB marks one of the most aggressive dovish central banks amongst the majors and carries significant responsibility for sustaining the belief that market enthusiasm is borne out of the extraordinary support these groups are offering to the system. Perhaps recognizing the position they hold and uneven health of its member economies, it is struggling to decide its course. The BoE is one of the most hawkish major players with a course of inflation that is above target and could be used to evaluate the central banks’ commitment to the ‘rule of law’ for targeting price growth as a determinant for monetary policy. Of course, they are dealing with the uncertainty of Brexit which is a situation not uncommon across the world’s largest economies. So this group is acting as an unexpected template for how to deal with external pressures. These are important groups whose moves will be monitored and likely mirrored by other central banks.
The upcoming two rate decisions this week will not be evaluated for the guidance they can offer others. Rather, they will instead be used as lesson on what to avoid. The Swiss National Bank (SNB) and Bank of Japan (BoJ) have failed to apply policy that renders the deserved effect for promoting growth and price stability – not to mention unstated goals of financial health. They are in fact both groups that have lost significant credibility in the markets, which makes their job all the more unmanageable. The SNB will no doubt keep its rates firmly in negative territory, yet the desired depreciation of the Swiss Franc is unlikely to follow years of unchanged policy. Given the dependency on exports of goods and services – and particularly to the EU – they are primarily concerned with the unfavorable level of the EURCHF exchange rate. This will not change materially until the ECB itself follows a course that allows for more appreciation of the Euro.
While the BoJ has not done anything so dramatic as the SNB’s implementation and sudden removal of a floor on its key exchange rate, the central bank has clearly embarked on a policy course that has consistently fallen short of its mark. Interest rates in Japan have been kept near zero for decades, and the rise of QE programs was eagerly adopted by the group in an effort to stoke price growth. Despite a steady escalation of this downpour of funds, price pressures have not solidified and the markets have increasingly discounted their ability to even move the Japanese Yen for secondary favor. What we should worry about from these two is what the market response is when such groups are forced to capitulate or the recognition of how exposed the system is should another crisis arise where such groups have no hope of averting collapse.
Expected index adjustments
Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 17 Sep 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect your positions, please take a look at the video.
NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a cash neutral adjustment on your account. Special Divs are highlighted in orange.
Special dividends
You can see the special dividends listed below. Unfortunately we do not have granular insight on the effect on the index for the index in question, however the below maybe helpful for some. Please note the dates below are the stock adjustments in the underlying individual instrument, whilst the index div adjustments are taken out the day before on the IG platform at the cash close.
Index
Bloomberg Code
Effective Date
Dividend Amount
AS51
QUB AU
18/09/2018
28.571
TOP40
OMU SJ
19/09/2018
100
AS51
SPK AU
20/09/2018
19.375
XIN9I
601857 CH
21/09/2018
2.22
HIS
27 HK
21/09/2018
50
AEX
RAND NA
24/09/2018
69
How do dividend adjustments work?
As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is affected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Treasury Secretary Steven Mnuchin has invited Chinese delegates to a new round of trade talks. The news breaks just days after Trump threatened additional tariffs on Chinese goods.
Asian equities edged higher on Thursday in response to news braking of potential US-China trade negotiations, and have partially recovered previous losses.
While the UK and Europe prepare for the final rounds of Brexit negotiations, the government steps up its contingency planning. The prime minister is set to hold a three-hour cabinet meeting to discuss the eventuality of a no-deal Brexit.
US Crude prices rise on the back of a greater-than-expected fall in US inventories.
The crypto market has now plunged over 80% from its January highs, beating the infamous dot com bubble burst in 2000, which only managed a 78% drop instead. The market cap now sits at a 10 month low.
Asian overnight: Asian markets received a welcome boost, as attempts from the US to restart trade talks with China raised optimism ahead of a whole raft of new tariffs being imposed. Predictably, the Chinese markets led the way, while Australian stocks suffered despite a strong rise in the basic materials sector. This comes after the Australian jobs report which boosted the AUD after a sharp rise in employment change, from -4.3k to 44k.
UK, US and Europe: Looking ahead, the focus will be on the central banks, as both the BoE and ECB produce their latest rate decisions. Despite a lack of expectations when it comes to any policy shift, volatility is likely to be heightened for European currencies. In the afternoon, keep an eye out for US CPI, followed by appearances from FOMC members Quarles and Bostic.
South Africa: Following weak Producer Price Index data out of the US yesterday, we have seen the dollar soften and commodity prices start to rebound. The Jse Allshare Index is expected to open marginally higher this morning. Tencent Holdings is up 3.44% today suggestive of a positive start for major holding company Naspers. BHP Billiton is up 0.7% in Australia, suggestive of a positive start for locally listed diversified resource counters.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
12pm – BoE rate decision & statement: no change expected in policy, but watch for the voting patterns. Market to watch: GBP crosses
12.45pm – ECB rate decision (press conference 1.30pm): again, no change is expected but hints of further policy direction will influence EUR and European indices. Markets to watch: Eurozone indices, EUR crosses
1.30pm – US initial jobless claims (w/e 8 September), CPI (August): claims to rise to 206K from 203K, and CPI to be 2.7% YoY and 0.1% MoM, from 2.9% and 0.2%. Core CPI to be 2.4% YoY and 0.2% MoM, both in line with July. Markets to watch: US indices, USD crosses
Corporate News, Upgrades and Downgrades
Impala Platinum FY18 results showed a loss per share of 1486c (FY17 1145c).
Aspen Pharmacare FY18 results showed normalised headline earnings earnings per share to have increased by 10%.
Morrisons said that underlying first-half pre-tax profit rose 9% to £193 million, while like-for-like sales rose 4.9%. The group has now seen sales growth for eleven consecutive quarters. The dividend was raised to 1.85p, up 11.4%, along with a special dividend of 2p per share.
GVC Holdings reported an 8% rise in total group net gaming revenue for the first half, while it expects to save £30 million more in cost savings than originally forecast as part of its acquisition of Ladbrokes Coral.
Legal & General has taken on £4.4 billion of pension liabilities from British Airways.
Antofagasta upgraded to hold at HSBC
KAZ Minerals upgraded to buy at HSBC
Navigator Co upgraded to buy at Haitong
Nynomic upgraded to buy at Oddo BH
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Mark Carney will stay on as the BoE (Bank of England) governor until the end of January 2020 to help the UK through any Brexit turbulence.
Unilever laid out plans for it's December listing as a new Dutch entity, initiated originally due to Brexit risks.
China is set to request the World Trade Organization (WTO) to hit the US with good duties. Dollar slips.
Oil prices have risen following a report that the US crude inventories are set to decline.
Whilst top oil producer Russia warns of a fragile global oil market, sanctions on Iran are expected to tighten supply.
Asian overnight: Trade war concerns continue to loom over Asian markets, with the Hang Seng providing the one outlier within a wider bearish story for overnight indices. Chinese stocks suffered in particular, as the two sides refuse to back down amid claims of further impending sanctions. Oil prices managed to push higher, as Hurricane Florence continues to bear down upon the East coast. Meanwhile, in Australia we saw a further deterioration in the Westpac Consumer Sentiment survey, sending AUDUSD lower yet again. Global markets are looking a little healthier this morning with US Index Futures extending overnight gains in US equity markets.
UK, US and Europe: Looking ahead, crude inventories will ensure that WTI and Brent remain at the forefront of the investor mindset. However, apart from the US PPI inflation figure, we are looking at a relatively quiet day for the European and US session calendars. Keep an eye out for an appearance from Fed member Brainard later in the day.
South Africa: The Jse Allshare Index is in turn expected to trade slightly firmer on open. The dollar has recouped some of yesterday's losses which see's precious metal prices trading slightly lower this morning. The trade war narrative continues to weigh on base metal prices which were under significant pressure yesterday, although they are posting a marginal recovery this morning. Tencent Holdings is trading 0.45% higher in Asia, suggestive of a positive start for major holding company Naspers. BHP Billiton is trading 0.61% lower in Australia this morning suggestive of a softer start for local diversified resource counters.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
1.30pm – US PPI (August): producer prices to rise 0.2% MoM from 0%, and core PPI to rise 0.2% from 0.1%. Market to watch: USD crosses
3.30pm – US EIA crude inventories (w/e 7 September): stockpiles expected to fall by 3.4 million barrels from a 4.3 million drop a week earlier. Markets to watch: Brent, WTI
Corporate News, Upgrades and Downgrades
SSE has issued a profit warning, saying that adjusted operating profit for the first half will be down 50% compared to a year earlier, due to warmer weather and higher prices that have hit demand.
Sports Direct said it continued to trade in line with expectations, with underlying EBITDA to rise between 5% and 15%, excluding the acquisition of House of Fraser.
Clover Industries FY18 results showed normalised headline earnings earnings per share to have increased by 224.7%.
LSE Upgraded to Buy at AlphaValue
Taylor Wimpey Upgraded to Overweight at Barclays
Anglo American Upgraded to Buy at HSBC
Gestamp Upgraded to Overweight at JPMorgan Moody's has placed MTN on review for downgrade
Telefonica Downgraded to Underweight at JPMorgan
Crest Nicholson Cut to Equal-weight at Barclays
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
GBP rallies on Brexit talks and a hope for a deal before the year is out.
Whilst there seems to be a break in tariff hostilities, it seen by most as only temporary.
A softer yen helped support Japan's Nikkei.
Asian overnight: Chinese and Hong Kong stocks were the two weak spots in a mixed overnight session, with strong gains for Japanese and Australian markets. The expected imposition of a whole raft of new US tariffs on Chinese goods has brought about further pressure on businesses within the region, with Trump seeking to target the vast majority of Chinese imports into the US. Much of the sentiment has been bearish of late, as the gains in Japan and Australia are largely a break from the norm, as talk of fresh US tax reforms help improve the short-term outlook.
UK, US and Europe: Looking ahead, the UK remains in focus following a day of data yesterday. This morning sees the UK jobs report released, with markets keeping a particularly close eye on the average earnings figure given the impact on inflation expectations. While we see precious few notable releases from the US today, the eurozone also comes into focus alongside the UK, with German ZEW economic sentiment, and eurozone employment change worth watching out for.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
9.30am – UK employment data: claimant count to fall by 6200 in August, from a rise of 6200 a month earlier. Unemployment rate to rise to 4.2% for July from 4%, while July average earnings to rise 2.5%, from a June rise of 2.4%. Markets to watch: GBP crosses
10am – German ZEW index (September): index to rise to -10.4 from -13.7. Market to watch: EUR crosses
Corporate News, Upgrades and Downgrades
Ashtead said that it expected full-year results to be ahead of forecasts, as underlying earnings for the quarter to 31 July rose 20% to £503.7 million. A weaker pound has driven this improved performance.
Anglo American reported a fall in De Beers diamond sales, which fell to $505 million in the seventh cycle of 2018 compared to $533 million for the sixth cycle of 2017.
Koenig & Bauer Upgraded to Buy at HSBC
Kion Upgraded to Buy at HSBC
Ubisoft Upgraded to Overweight at JPMorgan
J D Wetherspoon Upgraded to Buy at Berenberg
Galp Downgraded to Neutral at JPMorgan
Heineken Downgraded to Sell at Berenberg
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Asian stocks have slumped to a 14 month low on the back of China worries.
USD edges higher as trade tensions keep markets on edge, whilst oil rises as new production in US drilling stalls.
Slightly higher dollar causes gold to fall, along with rate hike views and trade war worries.
Asian overnight: Fresh tariff concerns hit Asian markets overnight, with Apple suppliers particularly hard hit thanks to the US president’s tweets regarding the tech giant moving production to the US. Chinese stocks were lower, while Australia was broadly flat and Japan managed a small rise. Equities rebounded in the US after a better jobs report, with strength in wages particularly encouraging for US consumer spending.
UK, US and Europe: UK trade data is the main event of the morning, while a busier week for retailers kicks off with numbers from Associated British Foods. Expect plenty of focus on Sweden after an indecisive election result there, with the incumbent centre-left government likely to spend the next two weeks trying to form a coalition.
South Africa: Global markets are trading mixed this morning with US Index Futures trading marginally higher, while most Asian markets (excluding Japan) are trading lower this morning. The Jse Allshare Index is expected to trade flat to marginally lower om open. The dollar continues to trade firmer and in turn we see commodity prices under marginal pressure this morning. Tencent Holdings is down 0.76% in Asia suggestive of a similar start for major holding company Naspers. BHP Billiton is down 0.32% in Australia suggestive of a softer start for locally listed resource counters.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
9.30am – UK trade balance (July), GDP (July):trade deficit forecast to widen to £2.3 billion from £1.8 billion. GDP to rise 0.1% MoM. Market to watch: GBP crosses
Corporate News, Upgrades and Downgrades
AVI Ltd FY18 results showed headline earnings to have increased by 7% from the prior year.
Afrox Ltd Interim results showed diluted core headline earnings per share to have increased by 11.5% from the previous year's interim period.
Associated British Foods said that its full-year outlook was unchanged, as Primark profits offset lower sugar prices. Sales were down 2% like-for-like at Primark for the year to 15 September.
RPC Group has said that it is in discussions regarding a sale of the company with Apollo and Bain Capital.
Aurubis Upgraded to Neutral at Goldman
Rio Tinto Upgraded to Overweight at JPMorgan
Norsk Hydro Upgraded to Overweight at JPMorgan
Nornickel GDRs Upgraded to Overweight at JPMorgan
Danske Bank Cut to Hold at Kepler Cheuvreux
Scor Downgraded to Hold at Jefferies
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
For whatever good news that could come out this week in global markets, it would take something of extreme magnitude to distract traders from the unfolding emerging market crisis and escalating US-China trade war. The debilitating aspect of both stories is the sense of randomness and chaos surrounding each. Regarding emerging markets, the concern is how challenging it is to judge what exposure developed markets have to the various issues plaguing them; regarding the US-China trade war, the perception is becoming that US President Trump lacks a substantive plan for trade negotiations and is simply shooting from the hip. The week ahead may well be defined by the search for clarity and certainty, two things traders appear to have abandoned hope for in recent weeks.
US Indices: The sell-off in response to the broad sweeping macroeconomic problems confronting markets is beginning to manifest in (thus far) resilient US equity markets. Despite the wide-based falls in Asian and European indices last week, the major US indices appeared (on the surface) to shrug-off emerging market and trade war concerns for the better part of last week’s trade. Instead, US markets traded primarily off the potential regulatory impact to US tech stocks of a congress enquiry into the sector and how it’s been used manipulate US civil society: the NASDAQ lost 2.3 per cent for the week, and the S&P500 finding itself dragged over 1 per cent lower. It was only on Friday that US markets began to demonstrate signs of macro-related stress, with the trade-sensitive Dow Jones dipping back below 26,000.
Trade war: It was on the back of a new escalation in the US-China trade war on Friday that global equities were driven lower, establishing a negative lead for the week ahead. Following the end of the so-called consultation period for the proposed $US200bn worth of tariffs from US President Trump’s administration on Chinese imports, US President Trump informally announced his intentions to slap tariffs on additional $US267bn worth of goods. The total sum would encompass effectively all imports coming from China into the US, marking an almost complete break-down in the trade relationship between the US and China. The MSCI World Index fell to new one-year lows in response to President Trump’s comments, as hopes fade that the President will repress is protectionist impulse.
US NFP: The risks relating to global trade diverted attention from Friday night’s major US Non-Farm Payrolls release – the final before the US Federal Reserve’s highly anticipated meeting on September 26th, at which the Fed is all but certain to hike interest rates. To the (assumed) delight of policy makers, the NFP release showed another bumper set of numbers, with the US economy adding another 201k jobs last month – enough to support a 3.9 per cent unemployment rate, even despite a climbing participation rate. The most welcomed detail in the release however was wage growth figures, which showed an above forecast boost in worker pay of 0.4 per cent last month, to take annualized wage growth to 2.9 per cent.
US rates and currency: The response to the remarkably positive US NFP release was considerable. Interest rate markets swiftly priced in a greater probability of two more interest rate hikes before the end of 2018 and boosted bets that the Fed would maintain its hiking cycle into 2019. US Treasury yields ticked up across the curve consequently, driving the yield on benchmark 10 Year Treasuries to around 2.94 per cent. The anticipated higher yields sparked a broad rally in the US Dollar, pushing the US Dollar Index around 0.5 per cent higher to 95.35, as the EUR/USD tumbled back into the 1.15 handle and the GBP/USD below 1.30 once more.
Aussie Dollar: The Australian Dollar suffered because of the stronger greenback, breaking through oft-quoted support at 0.7160. As had been predicted, the clearing of that level ignited a bout of heightened selling of the local unit, sending it to two-and-a-half year lows. The latest fall in the AUD/USD comes following several weeks of selling, courtesy of growing fears that global growth will be severely dented by global trade turmoil. The currency now looks exposed to further downside from here, as the psychologically significant 0.7000 mark opens-up with limited support – a level that looks ever more vulnerable given the RSI presently sits above oversold levels.
ASX200: SPI futures are indicating a 23-point drop at the open for the ASX200, in a day that shapes up as another challenging one for the Asian region. The calendar is bereft of local economic data today following the last fortnight’s slew of domestic releases, with most interest to be directed toward Chinese CPI data this afternoon before European markets prepare for UK GDP tonight. Having pulled back from its decade long highs, the fortunes of the ASX will hinge on whether bearish sentiment can ease in the face of trade war and emerging market related risks. IG data is suggesting traders are about 67 per cent long on the ASX currently, however the continued climb in the VIX above 15 suggests that bearishness is increasing, suggesting a challenge of support of 6140 is likely today.
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Expected index adjustments
Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 10 Sep 2018. If you have any queries or questions on this please let us know in the comments section below. For further information regarding dividend adjustments, and how they affect your positions, please take a look at the video.
NB: All dividend adjustments are forecasts and therefore speculative. A dividend adjustment is a cash neutral adjustment on your account. Special Divs are highlighted in orange.
Special dividends
Index
Bloomberg Code
Effective Date
Summary
Dividend Amount
AS51
WOW AU
13/09/2018
Special Div
14.2857
AS51
QUB AU
18/09/2018
Special Div
2.8571
HSI
857 HK
13/09/2018
Special Div
2.22
HSCEI
857 HK
13/09/2018
Special Div
2.22
How do dividend adjustments work?
As you know, constituent stocks of an index will periodically pay dividends to shareholders. When they do, the overall value of the index is effected, causing it to drop by a certain amount. Each week, we receive the forecast for the number of points any index is due to drop by, and we publish this for you. As dividends are scheduled, public events, it is important to remember that leveraged index traders can neither profit nor lose from such price movements.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Important European Central Bank Rate Decisions
As we find distraction in trade wars and political risk, it is important to remember that we are still dealing with more traditional fundamental issues in the background. One of the most systemically important and extremely underpriced risks is the global market’s long-standing dependency on massive stimulus from the world’s largest central banks. That wave of easy money through massive rate cuts and largest stimulus programs has noticeably receded while recognition of more recent iterations of the collective effort have failed to earn the impact that it was pursued for: a return to steady inflation, faster economic activity and wage growth that outpaced the cost of goods. Instead, we are just left with the very effective but increasingly unwanted side effect of artificially inflated speculative assets.
Eventually, this big-picture fundamental gap will be reconsidered by the investing masses; and if that occurs amid a financial unwind, it could readily turn mere risk aversion into full-scale panic. As we await the inevitable reckoning, we will take in two important monetary policy updates from major central banks on opposite ends of the spectrum: the Bank of England (BoE) and European Central Bank (ECB). The BoE’s policy meeting is not expected to deliver another rate hike, and anticipation for forecasting is likely rather restrained. Currently, swaps are pricing in less than a 50 percent chance that the central bank will hike rates again before mid-2019. Given that this is a group that has already hiked a few times and has inflation figures to justify further moves if Governor Carney and Co want a reason, this decision can help establish the outlook for global monetary policy as a baseline for economic expectations.
Alternatively, evaluation of the ECB’s decision comes from the opposite perspective. The central bank is still employing its stimulus program but is expected to cut if off later this year. Following that, the expectation is for a rate hike to be triggered sometime mid-2019, but swaps currently put that outcome at a sparse 20 percent whereas a few months ago, it was supported by a more than 80 percent probability. Beyond just the rate decision and press conference, we are also expecting macroeconomic projections from the group. If one of the world’s most prolific (profligate?) policy groups deems the outlook does not deserve a steer away from crisis-level settings, what would that say about the health of the economy and financial system?
Another Week in the Trade Wars
Another week and another escalation in the ever-expanding global trade wars. From the heaviest front of the economic confrontation, the period for public feedback on the Trump administration’s proposed $200 billion increase in tariffs on key trade counterpart China came to a close. It is not clear how quickly this will be turned from theory into action, but the markets certainly aren’t simply discounting this marked intensification of the trade war between the two super powers as mere bluster. As remarkable as this threat is on its own, President Trump wasn’t content to leave the heavy threat to linger in the air. On Air Force One, the ‘leader of the free world’ said he was in fact considering a further increase in the United States’ pressure against its rival to the tune of $267 billion. That is $267 billion in addition to the as-yet realized $200 billion. A few months ago, the President – following on the initial warning of the $200 billion jump – said he was prepared to tax all Chinese tariffs.
With these successive programs, he would be taxing more than the United States total imports of Chinese goods through 2017 – over $517 billion with the $50 billion and metals taxes already in place versus $506 billion actually purchased. If we only realize the first massive slug of additional taxes, the retaliation from China will further complicate this situation. It will not be able to do a like-for-like retaliation as it will soon eclipse the total imports the country consumes from the US. Resorting to other measures to approximate can easily be construed by this administration as not just response but escalation. Meanwhile, not content to keeping the fight on one shore, the US failed to find a compromise with Canada in its ongoing negotiations to shore up – or more likely replace – NAFTA. If a breakthrough is found next week, the Canadian Dollar is still significantly discounted and could generate a hefty rally in response to the good news. And yet, settling the dispute for the North American trade partners will not raise much enthusiasm for the rest of the world.
In addition to Trump’s threats to raise the bill on China, he also made a very thinly veiled threat aimed at Japan who the US is currently engaging in trade discussions. A ‘good deal’ for the US is likely one for which Japanese officials will balk at even with the obvious risk of having to engage in a trade war. On the bright side, the US and EU have not furthered their war of words (autos tariffs, accusations of currency manipulation, threats to circumvent the other’s currency for causing systemic trouble) to one of action. Yet, considering much of this seems to move in cycles for who is targeted each week, give it time.
Global Political Risk Always Simmering and A President That Lashes Out Under Pressure
Political risks seemed to deflate in the US, UK and Euro-area this past week, but they certainly haven’t been resolved. Far from it. The coalition government in Italy is starting to run out of room for making commitments to both live up to campaign promises of increased government spending and checks on EU influence will simultaneously meeting obligations to control budget that will not send European officials and financial markets into a panic. From the UK, the Prime Minister Theresa May continues to find pressure from her government, cabinet and EU counterparts in navigating a Brexit negotiation that would somehow please all parties involved. This is ultimately impossible as the groups are in essence demanding outcomes that the antithesis of each other.
What we are left with when trading the Pound is a sentiment that seems to oscillate regularly but keeps landing back into the realm of firm warnings to prepare for a ‘no deal’ outcome. In the United States, President Trump is continually bombarded by the news media with scandals that are coming dangerously close to the leader himself. His penchant for retaliating on social media and in rallies is doing the opposite of quelling the storm. In general, it is important to leave our own political beliefs out of our investing – and especially out of our trading (short-term). There have been both economic booms and recessions under both Democrat and Republican administrations – and through various combinations of Executive and Legislative concerns.
However, political risks can spill into more immediate financial and economic issues which in turn can charge the market. Trump has said recently that he has considered shutting the government down again if Congress does not curb the rebellion against his agenda. There is also suggestion of a second tax cut being floated and we are still awaiting word that the fiscal stimulus promised on the campaign trail will be revived. What is particularly unique to the US President is his tendency to react to personal pressure from the Mueller investigation and news media’s general criticism with aggressive policy on other fronts. Would he have made the $267 billion threat of escalation against China this past week if the scrutiny over his actions were not so intense? It is difficult to argue that he is too level-headed for that retaliation against the world as there are too many examples to suggest the opposite.
USD price action ahead of ECB and BoE
The Asia equity market ex-Japan are looking at their lowest levels since July last year.
Tech sector as a whole was hit by a drop in chip stocks yesterday as well as a knock to social media.
Investors are cautious that new U.S. tariffs on China could come into play at any time.
Yen and Swiss franc are looking to be bid up for those looking at safe harbours.
Non-farm payrolls are out later today.
Asian overnight: Yet again trade concerns weighed on Asian markets, with the Hang Seng posting its worst week since February. Tech stocks remain under pressure in both the US and China, with the momentum trade in the Nasdaq seeing a stark turnaround. A rise in US gasoline reserves hit oil prices and helped drive energy stocks lower.
UK, US and Europe: Yesterday’s ADP numbers were weaker than forecast, so there will be some nervousness among dollar bulls ahead of NFPs this afternoon, while before this we have eurozone GDP figures. Trade war concerns remain front and centre, as the US and China ramp up the tensions.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
10am – eurozone GDP (Q2): expected to be 0.4% QoQ and 2.2% YoY, from 0.4% and 2.5% respectively. Market to watch: EUR crosses
1.30pm – US non-farm payrolls (August): NFPs expected to come in at 187K from 157K, while the unemployment rate holds at 3.9%. Average hourly earnings to be 0.3% MoM, in line with last month. Markets to watch: US indices, USD crosses
1.30pm – Canada employment data (August): 15,900 jobs forecast to have been created, from 54,100 a month earlier. Market to watch: CAD crosses
Corporate News, Upgrades and Downgrades
Playtech said that it has sold its 10% stake in Plus500 for £176 million. The proceeds will be used or general corporate purposes and to reduce net debt.
AstraZeneca said that the FDA had granted a breakthrough therapy label for its asthma treatment.
Aixtron upgraded to hold at Baader Helvea
BioMerieux upgraded to buy at Kepler Cheuvreux
Equinor upgraded to buy at SEB Equities
Idorsia upgraded to hold at Berenberg
Burberry cut to neutral at Goldman
MorphoSys downgraded to hold at Berenberg
Safran downgraded to hold at SocGen
Shire downgraded to hold at Berenberg
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Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
I just wanted to update all Community members to let them know that we have recently reduced the minimum bet sizes on some key indices, commodities, and FX markets. This has been done for both UK spread betting accounts and European CFD accounts.
What are the minimum bet sizes for indices, commodities and FX on IG? Correct as of 6th September 2018 but subject to change
Continued feedback
A key aim of Community is to keep a two way dialogue open between our client base and those on our trading services support team, core dealing and developer teams. The decision to reduce minimum bet sizes across these markets has in part been due to feedback received from a number of our clients and those on Community. A big thank you to those who have shared their thoughts on this over the last few weeks.
Please feel free to continue to add feedback and suggestions on Community at any point. If you have any feedback on this specific change please feel free to add it below.
All the best
IG Community moderator team
The Asian market index futures boards are seeing a sea of red on the back of continued EM anxieties.
Dollar seeing pressure as European peers are bid up.
Tesla stock slips as investor worries deepen, whilst the Tesla bond hits a record low.
Uber on track for an IPO in 2019, however there are no plans to sell it's tech unit according to CEO.
Goldman have dropped bitcoin trading plans for now according to reports. Crypto space crashes.
Gold seeing an increase in physical demand, whilst also helped by dollar weakness.
Asian overnight: Emerging market concerns continued to weigh on markets overnight, while the bruising handed out to US tech stocks also bore down on bullish sentiment. Tokyo, Hong Kong and Australia all fell, but there was one bright spot as the CSI 300 rose 0.4%. Keep an eye on UK utilities as Ofgem proposes an energy price cap that is the biggest intervention in the UK energy market since privatisation in the 1980s.
UK, US and Europe: US ADP numbers (delayed by a day due to the Labor Day holiday) and the ISM non-manufacturing number will be the main events today, ahead of non-farm payrolls tomorrow. Emerging market jitters will be watched closely, as will the ongoing strength in the US dollar.
Economic calendar - key events and forecast (times in BST)
Source: Daily FX Economic Calendar
1.15pm – US ADP report (August): 187K jobs expected to have been created, from 219K a month earlier. Markets to watch: US indices, USD crosses 3pm – US ISM non-mfg PMI (August): forecast to rise to 56 from 55.7. Markets to watch: US indices, USD crosses 4pm – US EIA crude inventories: forecast to rise to -0.88M from -2.6M. Markets to watch: WTI and Brent
Corporate News, Upgrades and Downgrades
Dixons Carphone reported flat like-for-like revenues in Q1, hit by difficulties in mobile phones, although consumer electronics were boosted by World Cup demand. Full-year pre-tax profit guidance was maintained at £300 million.
McCarthy & Stone has reduced its full-year operating profit forecast, due to weaker consumer spending and economic uncertainty. The firm now expects full year operating profit of £65-73 million, from the previous estimate of £65-80 million.
Melrose said that it suffered an operating loss of £256 million for the first half, down from a profit of £58 million. Trading for the second half so far remains in line with expectations.
BNP Paribas Upgraded to Hold at Berenberg
KAZ Minerals Upgraded to Equal-weight at Morgan Stanley
Enel Upgraded to Buy at Goldman
Scor Downgraded to Hold at SocGen
Bodycote Downgraded to Hold at Liberum
IMI Downgraded to Sell at Liberum
IGTV featured video
Information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
The pain in emerging markets continues to be too difficult to ignore, although it must be said that the effects of the crisis were relatively contained in overnight trade. There is this sneaking suspicion in markets presently, that whatever the worst outcome is for emerging markets, some of that must inevitably spill into the developed world. The issue is however, it remains to be seen how and where these signs of contagion may first show-up. Now of course it may not do so at all, but as the scope of the emerging market crisis is uncovered, the willingness to take the risk that it won’t spread to major financial markets is waning.
Global Indices: Against this back drop did the overnight session unfold, which showed the signs of the cautiousness pervading markets. Across global equity indices, the losses associated with the emerging market crisis (not to mention the trade war) persisted, with European indices all dropping more than 1 per cent; while their US counterparts also dipped, though were again less affected, demonstrating that region’s fundamental strength. The NASDAQ tumbled over 1 per cent, but that was due to scrutiny on the tech sector from a US Senate Intelligence Committee hearing about social media and foreign influence on US elections. This backed up another day of dismal activity in Asian markets, which saw the CSI300 lead the region lower, down nearly 2 per cent.
Haven plays: What is somewhat of a curiosity against the backdrop of diminished risk appetite is that there hasn’t been a huge pay into safe havens. Indeed, a degree of this has occurred, but not to the extent witnessed over the past several months when geopolitical and global financial risks have emerged. US Treasuries have best demonstrate this, with the yield on benchmark US 10 Year Treasuries floating 1-point higher to 2.90 per cent. In addition to that, the spread between that asset and its 2-year counterpart has widened, which often reflects an increased confidence about the medium-term prospects of an economy and financial markets.
Currencies: Hence, the activity in havens and currency markets more broadly may provide the insight into how to assess the emerging market crises and its effect on global equities. The US Dollar has perhaps benefitted from the yield play, but it hasn’t sky rocketed like was witness post the Turkey crisis. Moreover, the JPY, normally the chosen risk-off asset for traders, has fallen against the greenback, to trade at around 111.50. The GBP and EUR have lifted, saving the sterling from its struggles around the 1.28 handle, but that can be more attributed to improving relations between the UK and Europe. Ultimately, maybe the incongruent behaviour is equities, bond and currency markets reflect only a temporary withdrawal from equities while the emerging market problems are better understood.
ASX: The notion that the sell-off in global equities is transient and not structural will do little to console ASX200 bulls. SPI futures are indicating a drop of another 11 points at the open this morning, backing-up a day in which the market shed over 1 per cent. On a technical basis, the close yesterday below what was a relatively strong area of support around 6240 should be considered a concern. This opens room for further selling deeper into the 6200s, with 6220 being the next rung down from here. Given that yesterday’s losses were led by a 2 per cent fall in the materials sector, and that commodity prices collectively fell by around 0.5 per cent last night, a test of these levels on balance looks possible today.
GDP: Amid the sell-off in the ASX200 yesterday, the ABS released GDP figures for the June quarter, which smashed expectations out of the park. In a total reversal of the prevailing sentiment following a few weeks of weak data, the growth rate for the Australian economy was shown to have climbed to 3.4 per cent, exceeding even the RBA’s generally optimistic forecasts. The result places the Australian economy near the top of the OECD in terms of economic growth and comes even despite numerous domestic and global headwinds. While local traders effectively ignored the news – although AUD did temporarily bounce back around the 0.7200 – the growth figures do reassure investors that conditions are generally strong from a fundamental standpoint.
Consumption and rates: One area of yesterday’s GDP data that placed a dampener on the overall release, and caused a point of contention for market participants, was the revelation that the savings ratio has dipped to its lowest level since before the global financial crisis. The sluggish wages growth in the Australian economy explains this dynamic, as Australians on aggregate try to maintain their quality of living in the absence of pay rises by eating into savings. It is possibly this news, and its implications for already stretched consumption in the Australian economy, is what kept a lid on interest rate traders bullishness, with interest rate hike expectations ticking up only very marginally yesterday.
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