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Another blow to economic growth - EMEA Brief 15 Feb

Weak retail figures in the US have spilled over to most major stock markets, with European stocks set to open lower this morning. The 1.2% decline in retail sales for the month of December, the biggest drop in almost ten years,  have brought new fears that we are facing a global economic slowdown. The DJIA closed 104 points lower at 25,439.39, the S&P 500 closed 7 points lower at 2,745.73, whilst the Nasdaq managed to close in the positive with a gain of 6.6 points at 7,426.96. China's lower than expected inflation figures for the month of January have only added to ongoing concerns of a global slowdown in growth. China's consumer price index came in at a rise of 1.7%, lower than the expected figure of 1.9% polled by Reuters. These lingering concerns about the future of growth had most of China's stocks trading slightly lower on Friday, with he Shanghai composite down 0.62%, the Hang Seng index down 1.64% and the Shenzhen composite largely flat. Following the Chinese stocks, the Nikkei 225 was down 1.23% and the Topix was 0.88% lower. Donald Trump has reportedly agreed to sign a spending bill to avoid a second US government shutdown but it comes hand in hand with declaring a national emergency to receive funding for his Mexican wall in order to stop the "national security and humanitarian crisis at the border". Oil is continuing its three month rally as Brent crude oil prices have hit a high for 2019, above $65 per barrel. The West Texas Intermediate (WTI) crude futures were trading at around $55 a barrel, 0.6% higher than its previous settlement. This price rally is mostly due to OPEC cutting production in a bid to tighten market conditions and increase oil prices. Asian overnight: An overwhelmingly negative end to the week in Asia has seen sharp losses across Japan, China, and Hong Kong. Australia provided the one flash of green on an otherwise red session. Part of this pessimism comes as the US-China trade talks draw to an end once more, with a major breakthrough seemingly likely today. On the data front, Chinese inflation fell sharply to 1.7%, from 1.9%. Meanwhile, Japanese industrial production remained in negative growth for December. UK, US and Europe: Looking ahead, the UK focus remains in play, with the latest retail sales figures hoping to escape the downturn seen in yesterday’s US figures. In the US session, markets will be closely watching out for any announcements as the US-China trade talks draw to a close. Also make sure to keep an eye out for the latest Empire state manufacturing survey, Baker Hughes rig count, and Michigan consumer confidence data. We are also expecting to see Donald Trump call a national state of emergency in a bid to build his wall. On the UK side, we saw Theresa May lose yet another vote in parliament, making it even more difficult to gain any concessions from the EU. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 9.30am – UK retail sales (January): expected to rise 0.6% MoM. Market to watch: GBP crosses
1.30pm – US Empire State mfg index (February): index to rise to 6 from 3.9. Markets to watch: US indices, USD crosses
3pm – US Michigan consumer confidence (February, preliminary): confidence to rise, with the index rising to 94.5 from 91.2. Market to watch: USD crosses Corporate News, Upgrades and Downgrades Royal Bank of Scotland reported pre-tax profit of £1.62 billion for 2018, up from £752 million last year. A special dividend of 7.5p per share and a final dividend of 3.5p per share will b paid. However, the bank expects 2019 to be full of challenges. Segro will launch a £450 million share issue to fund its development pipeline. New shares will be issued at 10p each. Mondi expects to report stronger earnings thanks to stronger demand. Underlying ebitda for 2018 is expected to be above 2017’s €1.48 bilion. Patisserie Holdings has sold its Baker & Spice chain to the Department of Coffee & Social Affairs for £2.5 million. Capita upgraded to overweight at Barclays
Restaurant Group upgraded to buy at Berenberg
DFS Furniture upgraded to buy at Berenberg Domino’s Pizza Group downgraded to sell at Berenberg
Drax downgraded to sell at Citi
Oriflame downgraded to hold at SEB Equities
Proximus downgraded to underweight at Barclays 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.

DanielaIG

DanielaIG

A little bit of everything - APAC brief 15 Feb

A little bit of everything: It certainly wasn’t the highest-impact day market participants have experienced so far this year, but there was a spoonful of everything, thematically speaking that is, driving the macro-economic outlook for markets in 2019. To keep it high level, there was a series of significant growth-related data released out of all three of the world’s major economic geographies – China, Europe and China – plus a healthy smattering of geopolitics and corporate news to keep traders interested. Only, if you look at the price action, one might say that it didn’t amount to terribly much. Global equities are taking the middle road, posting a mixed day, as Wall Street creeps towards its close at time of writing; though some shifting in currency, rates, bonds and commodities markets has occurred.

Markets immune to trade-war headlines: Fresh trade war headlines are at the top of the list of headline risks, however in contrast to what’s been seen in the past, the reactions have been muted. Arguably, and barring any news that hints at a true resolution in the trade war, stories that the US and China are getting along just fine are becoming (relatively) ineffectual. Yesterday saw the news that the Trump administration is considering pushing the White House imposed March 1 deadline for trade negotiations back another 60 days. The developments saw the standard risk assets shift – Australian Dollar-up, Asian stocks-up, US futures-up, commodities-up – but compared to the massive relief rallies seen in the past, the price action indicated a market that’s wanting more than just piecemeal developments in trade-negotiations. US Retail Sales a shocker: Hence markets moved past that news, as the tradeable appeal of trade-war headlines fades. The meaningful event market participants had marked into their calendar for last night proved of greater import in the end: US Retail Sales numbers for December were released and showed an abysmal set of numbers. In fact, they were so bad that the experts and the punditry have effectively written them off as a passing anomaly – one that can’t quite be explained properly. The figures themselves revealed US Retail Sales contract by a huge -1.8% in December, well below the “flat” figure estimated by economists. Though consensus is saying the data was too-bad-to-be-true, traders have adjusted their positions: bets of a Fed rate hike have been unwound back to effectively a 0% chance in 2019. US Dollar falls; Treasuries suggest slowdown: Naturally, the US Dollar has dipped, registering daily falls against most major currencies. US Treasuries have rallied too, which has probably very marginally benefitted stocks, with the yield on the 10 Year Treasury note falling 4 basis points to 2.65 per cent. As the Chinese and European economies slow, the US economy is acting as the fulcrum of global growth at present. Data points like US Retail Sales begs the question of how long this dynamic may last. A little while yet seems to be the popular answer. A look at what the US yield curve is doing is illustrative in this regard: the yield on 3- and 5-year Treasuries are below that of the 2-year, portending recession-risk in the medium term. No recession, but outlook still dim for Europe: The Euro was bolstered by its own set of economic data overnight. GDP figures were released for the Euro-bloc and the German economy, and while bad, they weren't as bad as forecast. The Eurozone's GDP came-in on forecast at 0.2 per cent, and while the German figures missed estimates and showed a stagnant economy last quarter, traders took comfort from the notion that at least the data hadn’t set Germany up for a possibly technical recession. Despite this, and the fact the Euro is edging back towards 1.13 again, there is a growing sense of inevitability about a European recession at some point this year or next. These things can’t be predicted of course, and perhaps a turnaround will occur, however the balance of probabilities looks to support the notion a recession is looming. Pound falls as Brexit reality hits: Continued Brexit uncertainty won't help Europe's economy, and markets were delivered a fresh dose of that too overnight. UK Prime Minister Theresa May lost another key vote in the House of Commons, placing in peril any chance of a Brexit deal, or at least a bill delaying Brexit, being passed. The Pound has returned to its (disputably) proper place, plunging back again into the 1.27 handle last night, and Gilts have climbed on the basis that a hard-Brexit will do no favours for the Bank of England and its bid to "normalise" it's interest rate settings. As always, the Brexit developments are being considered a problem unique to the European region, with little ramifications for broader markets. If Brexit accelerates Europe's into recession though, then this view ought to change. ASX showing signs of a pullback: SPI Futures are indicating a 2-point dip for the ASX200 at time of writing. The ASX200 is exhibiting signs of exhaustion now, as the market fails to push the index near enough or beyond the 6100 level. The conditions remain in place for future upside beyond that mark, but for now, market participants seem happy to either take profits, fade rallies, or just sit things out. The banks have unwound their gains following the post-Banking Royal Commission rally, and though it is showing signs of fundamental strength, a steadying in the iron ore price has mining stocks climbing, but at a careful tick. Hypothetically: if a pull-back does occur, 6000 will be a level of psychological significance, before true support around 5940 is exposed. Written by Kyle Rodda - IG Australia

MaxIG

MaxIG

China's exports beat expectations for January - EMEA Brief 14 Feb

Figures released for China's exports in the month of January show a 9.1% growth year on year on its dollar-denominated exports. This has beat expectations of a 3% drop in exports  predicted for the month of January on the back of December's 4.4% drop. This increase brings the total Chinese trade surplus to $39.16 billion for the month of January, notably lower than the $57.06 billion surplus in December. Despite the better than expected figures, some investors are still weary about this signalling real growth in Chinese exports, as they believe this increase can be on the back of companies relocating it products in anticipation of the possible outcomes on the ongoing US-China trade wars. As news came out that US President Donal Trump is considering extending the China tariffs deadline by 60 days, Chinese stocks were slightly higher on Thursday as they pay close attention to the outcome of the US-China talks taking placed in Beijing. Despite the better than expected trade figures mentioned above, the Shanghai composite was down by 0.3% while the Shenzhen composite was slightly higher, up by 0.3%. Hing Kong's Hang Seng index fell by 0.37%. The DJIA closed on the positive on Wednesday, up 117.51 points at 25,543.27, on the back of positive outcomes from trade talks and better than expected stock performances. The S&P 500 closed 0.3% higher at 2,753.03 and the Nasdaq was up by 0.08% closing at 7,420.38. Oil continued its rise on Thursday's Asian session as progress on tariff talks is expected to improve the outlook on global trade and economic growth, and Chinese export figures show that imports of oil remained above the 10 million barrels per day threshold for a third month in a row. The WTI crude futures were up 0.5% at $54.16 and Brent crude oil futures were up 0.6% at $63.98 at midday. Theresa May stood her ground yesterday as she announced that she is willing to go through with a no deal Brexit if MPs do not vote her amended deal, after rumours that she was considering extending article 50 to avoid a hard Brexit on March 29. Credit Suisse has bounced back to profits for the first time since 2014. The swiss bank reported a profit of 2.1 billion swiss francs for the full year of 2018, after posting a loss of 983 million swiss francs in 2017. The bank completed a 3 year restructuring program at the end of last year. Asian overnight: Asian markets failed to follow up on yesterday’s gains, with indecision rife despite seemingly positive developments in US-China trade talks. The session saw minimal moves, with a 0.3% rise in the Shenzhen composite marking the biggest mover which has seen most early moves eradicated as they move towards the close. This came on a session where data dominated, with a rise in Japanese Q4 GDP (0.3%) being overshadowed by a huge revision to the Q3 figure (-0.6% from -0.3%). That marks the biggest slowdown in Japanese GDP since 2014. Elsewhere, the Chinese trade balance data provided a much more optimistic outlook, with a sharp jump in both imports and exports helping improve sentiment around the Asian powerhouse. UK, US and Europe: Germany has just narrowly missed a technical recession as Q4 GDP came in flat at a 0% growth, below the 0.1% growth forecasts. This poses big concerns for the future growth of the European Union as Germany is usually seen as the big growth driver. The troubling data comes after Italy announced it had entered a technical recession at the end of January as it had two consecutive quarters with GDP contraction. Looking ahead, growth concerns remain the key focus for the European session, with eurozone GDP figures for Q4 expected to bring continued volatility for the euro and eurozone stock markets. In the US, retail sales, PPI, and business inventories are worth keeping an eye out for, while Coca-Cola provides the main US company to report. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 10am – eurozone GDP (Q4, preliminary): QoQ rate expected to be 0.2% and YoY 1.2%, from 0.2% and 1.6% respectively. Market to watch: EUR crosses
1.30pm – US retail sales (December): expected to rise 0.2% MoM. Markets to watch: US indices, USD crosses
Evening – UK Parliament to vote on Brexit deal Corporate News, Upgrades and Downgrades EasyJet said that it was in discussions with Ferrovie and Delta about forming a consortium to look at Alitalia, but that there was no certainty any transaction would proceed. AstraZeneca reported a 2 fall in overall revenue for 2018, to $22.09 billion, while reported operating profit fell 7% to $3.38 billion. The firm said that the final quarter was strong, with a good performance in its emerging markets business. Micro Focus suffered a 5.3% drop in revenue for the year to the end of October, but adjusted earnings rose 9.2% to $1.53 billion. Chemring Group raised to overweight at Barclays
Grieg Seafood upgraded to buy at Fearnley
Royal Mail raised to equal-weight at Morgan Stanley Air France-KLM cut to sector perform at RBC
Dunelm downgraded to reduce at HSBC
RSA downgraded to neutral at JPMorgan 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.  

DanielaIG

DanielaIG

ASX missed the party yesterday - APAC brief 14 Feb

ASX missed the party yesterday: The ASX bucked the trend yesterday, at least across the Asian region, closing 0.26 per cent lower at 6063. Ostensibly, Australian shares missed-out on the party: global equities were noticeably higher across the board, with the other major regional indices in China, Japan and Hong Kong adding well in excess of 1 per cent for the day. Though a step-back for the Bulls, it's no cause for alarm: the price action speaks of a few idiosyncratic quirks on the ASX200 yesterday. The index was weighed down by a few heavy-hitters: CBA went ex-dividend and its share price fell 2.89 per cent; and despite reporting some solid results, over-zealous investors dumped CSL following the release of that company's earnings, to push its share price down 3.92 per cent. CBA and CSL weighed on the ASX200: In an index like the ASX200, which is quite top heavy, when 2 of your top 5 weightiest stocks underperform markedly, registering a day in the green is always going to be a challenge. Other measures of how the market performed for the day present more favourably for the Australian share market. Breadth was respectable at about 60 per cent, for one. There was another failure by the ASX200 to break resistance at 6100, which might add to the view the market has gassed-out in the short term and is due for a pullback. Conditions for medium term upside remain in place nevertheless, especially if the prevailing macro-themes in the market, ranging from central bank policy to the trade-war, continue to fall the way of the Bulls. Risk appetite elevated on positive news: SPI futures are indicating a modest lift in the ASX200 this morning, of around about 6 points. Wall Street, at least as this is being written, is registering another day of gains, albeit on some pretty low octane trade. The week in global equities has been defined by more positive trade-war headlines, which has raised the prospect of a continued freeze in trade tensions. It's difficult to imagine that the trade-war will go away any time soon, but markets probably have accounted for that in prices. Global growth will stay the underlying bugbear, so long as central bankers don't rattle the cage with rate-hike talk again. However, a weaker global economy is something traders seem willing to stomach for as long as recession risk remains low in the short term. Upside exists as long as recession risk is low: That's likely where the current equity market-run would stop in its tracks: if a recession finally hits one of the major economic regions. In the absence of this though, history suggests that, although the returns would be meagre compared to what was experienced during the "synchronised global growth" upswing in 2017/18, gains in stocks in an environment of slackened global growth are still possible (if not the recent norm) if loose monetary policy is maintained. It’s looking as though a familiar dynamic is taking hold: a fundamental search for yield, in an environment that supports risk taking, is seeing capital move out of safer assets in fixed income and cash markets, and into higher yield equity markets – boding well for global equity indices in the short-to-medium term. Its Fed before fundamentals but that could change: Market participants have proven their concern is first with the Fed and financial conditions, followed by fundamental concerns like earnings, global growth and concomitant factors like the trade-war and geopolitical ructions. Again, that balance would shift in the event recession risk becomes too heightened. While not an immediate problem now, such a risk ought not to be waived away. Economic data is treading a fine line, especially in Europe, and would indicate the world economy is on some sort of slippery slope. China is in the same boat, but unfortunately the opacity of their financial system and economy make it difficult to garner a credible view on the Middle Kingdom. The US stands out as a beacon in the global economy presently and is willed by the Bulls to maintain its currently solid growth outlook. Inflation risk looking low: One risk that doesn't appear too bothersome for traders -- in fact, it may be a welcomed dynamic -- is that inflation in developed markets is apparently flatlining once again. It was a theme of last night's trade: market’s received inflation data out of the U.K. and US economies, prefacing the release of Chinese CPI data today. On balance, CPI missed expectations in both the US and UK overnight, presumably to the relief of central bankers, who in the face of market volatility and growth concerns, would loathe being pushed into hiking rates because of an inflation-outbreak. In response to the news, traders maintained their position that global rates will stay low this year, as the global economy wrangles with its current funk. European bond curves flattening; greenback stands to benefit: Bond curves have flattened in the European region, consequently. Bizarrely, and this does not bode well for the Euro and Pound potentially, markets are still pricing in some-chance of a rate hike still from the Bank of England or European Central Bank this year. Far be it to argue with the will and wisdom of the market but given Brexit tensions and clear signs of cracks in the continent’s economy, the notion rates can move higher in this dynamic is fanciful. The US Dollar will be a barometer for European (and probably global) growth risks, as well as the rate outlook for the BOE and ECB. Although the greenback is still range-bound here-and-now, a desire for safety and higher yield should attract investors to Treasuries, and subsequently bolster the USD going forward. Written by Kyle Rodda - IG Australia

MaxIG

MaxIG

Santander unpleasantly surprises credit investors - EMEA Brief 13 Feb

Banco Santander SA skipped an option to call 1.5 billion euros of convertible notes next month, after leaving investors in the dark for weeks. The news had the bonds trade at 97 cents on the euro, after being almost at par last week. A portfolio manager at Financiere de La Cite SAS commented that credit buyers “will need some serious new issue premium to touch that name again”. Trading in Asia was optimistic on hopes of a trade war resolution as Trump commented during a cabinet meeting on Tuesday that he is open to extend the March 1st deadline to raise tariffs on China. The top performer among major indices was the Nikkei, which advanced 1%, followed by the Shanghai Composite Index which as up 0.9%. None of the concerns that recently stalled riskier assets have disappeared, however markets seem more positive that economic growth can be sustained. Oil climbed 1% amidst resuming hopes following the 800,000 barrels per day production cut in January by Saudi Arabia, confirmed on Tuesday. More upward pressure is due to supply concerns in Venezuela, following US sanctions. However, the crude market could be well balanced as US crude production rose by 2 million bpd last year and trade concerns could further weaken demand. Kiwi dollar was up at least 1.5% against all major currencies on the IG Web Trading Platform following news that New Zealand’s central bank would push out forecasts for an interest-rate increase to early 2021. The revision disappointed market participants that were expecting looser monetary policy later this year. Reserve Bank Governor Adrian Orr commented that chances of a rate reduction have not increased, underplaying systemic risks that had markets concerned recently. The offshore yuan strengthened overnight on trade war optimism. USD/CNH was down 0.15% at 5:40am on the IG Web Trading Platform. Markets were positive on Monday after the Lunar New Year holiday, however Chinese spending grew only 8.5% to CNY 1.01 trillion, making it the smallest celebration since 2011. Asian overnight: Asian markets traded overwhelmingly in the green after Donald Trump floated the idea of extending the 1 March deadline with China. With both sides seemingly working hard towards a deal, it feels as if there is an end in sight. Officials in Washington and Beijing had expressed hopes that a new round of talks which began this week would bring them nearer to easing their seven-month trade war. "We are currently seeing negative sentiment which had built up over trade concerns and U.S. fiscal issues being unwound," said Soichiro Monji, senior economist at Daiwa SB Investments in Tokyo.  "For risk assets to move purely on optimism, the U.S.-China trade row will need to see some kind of a closure in March. A more permanent solution to avoid a U.S. government shutdown is also necessary. It has to be remembered that we are not there yet".  UK, US and Europe: U.S. President Donald Trump said on Tuesday that he could see letting the March 1 deadline for reaching a trade agreement with China slide a little if the two sides were close to a complete deal.  U.S. congressional negotiators cobbled together a tentative bipartisan border security deal late on Monday to avert another partial government shutdown. However, Trump on Tuesday expressed displeasure with the agreement and said he had yet to decide whether to support it. The CBOE Volatility Index , Wall Street's so-called "fear gauge," dropped to as low as 14.95, its lowest level in more than four months, overnight. Looking ahead, inflation is going to be in focus. The UK headline inflation rate is expected to fall back to 1.9% from 2.1%, easing pressure on the BoE once more. We also see CPI data from the US in the afternoon, where the monthly CPI reading is expected to rise from -0.1% to 0.1%. Also keep an eye out for the eurozone industrial production, and US crude inventories data. South Africa: Markets have continued to gain following comments from US President, Donald Trump that the 1 March deadline, where US will resume increasing tariffs on Chinese imports, could be extended (a bit) if necessary. The news adds to the suggestion that the US government shutdown will be averted this week. The dollar has weakened marginally to aid modest gains in commodity prices and a slight recovery in emerging market currencies (including the rand). This mornings gains are expected to be broadbased in the South African market although led by resource counters. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 9.30am – UK CPI (January): CPI to rise 2% YoY from 2.1%, and core CPI to rise 2.1% YoY and fall 0.7% MoM. Markets to watch: GBP crosses 1.30pm – US CPI (January): CPI to rise 1.6% YoY and fall 0.1% MoM, and core CPI to rise 2.1% YoY from 2.2%. Market to watch: USD crosses 3.30pm – EIA crude inventories (w/e 8 February): stockpiles rose by 1.26 million a week earlier. Markets to watch: Brent, WTI 11.50pm – Japan GDP (Q4, preliminary): growth forecast to be 0.4% QoQ and 1.4% YoY. Market to watch: JPY crosses Corporate News, Upgrades and Downgrades Smurfit Kappa said that it suffered a pre-tax loss for 2018 of €404 million, compared to €576 million a year earlier. Underlying earnings were up 25% to €1.55 billion however, while revenue was 4% higher at €8.95 billion. Dunelm reported a 16.7% rise in pre-tax profits to £56.3 million, while revenue was up 1.2% at £545.4 million. The dividend was raised by 7.1% to 7.5p per share. It remains on track to hit full-year expectations.  Tullow Oil reported a pre-tax profit of $85 million for the year, compared to a loss of $175 million a year earlier, while revenue rose 7.9% to $1.86 billion, while the firm will also pay a final dividend of 4.8 cents per share.  Banco BPM upgraded to buy at Citi
Investec have a rating of buy on Anglo American Platinum with a target price of 62500c
SBG Securities have a speculative buy rating on ArcelorMittal South Africa with a target price of 520c ABB downgraded to hold at SEB Equities
Metro AG downgraded to underweight at JPMorgan
Nyfosa downgraded to hold at SEB Equities
Orion downgraded to underperform at Credit Suiss 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.  

IG-Andi

IG-Andi

New headlines to chase - APAC brief 13 Feb

New headlines to chase: The discourse in markets shifted early this week to where the next upside catalyst would come from. It needn't be substantial; just enough to fuel sentiment and attract buyers back into the market. In the last 24 hours, market participants received what they'd be yearning for: the combination of an in-principle deal in US Congress for border-security funding, along with the announcement that the US-China trade-truce deadline could be extended, has stoked bullish sentiment. These stories are more headlines than substance, however one thing traders ought to have heard ad nauseum recently is that, indeed, this is a headline driven market. So: for the last 12-18 hours in the financial world, markets have shown all the trappings of a renewed risk-on impulse. Short-term bullishness depends on Trump: It can be for some an uncomfortable thought: the key variable for both the US government funding and trade-was issues is the mercurial US President Donald Trump.
The US President, it must be said, has outwardly advocated for a resolution to each concern. The worry for markets may be though whether Trump maintains his balanced temperament on the matters, and that there isn't an ulterior motive held by the President on either issue that could subvert the market's positivity. There isn't a clear timeline, other than those which have been imposed upon the President, to arrive at a decision regarding border funding or the trade-truce extension. Traders are taking bullish positions, but while doing so must surely be in a heightened state of vigilance, at least until firm validation for the rally arrives. Global growth concerns deferred: The activity at the margins driving price activity in financial markets overnight speaks of slightly diminished fears relating to the global growth slow down. It has to be said that the weakening growth outlook for the world economy is still hurtling like a freight train towards markets; the news last night simply increased hopes that perhaps there may be some tapping of the brakes when it comes to this phenomenon. Growth sensitive currencies were the major beneficiaries of last night's trade-headlines: the Australian Dollar, for one, is edging back to the 0.7100 handle. The US Dollar took a breather from its recent rally, as global bond yields climbed, and credit spreads narrowed – for the first time in several sessions. The confluence factors naturally gave a boost to stocks. Fear is falling, thanks to a friendlier Fed: Considering the balance of evidence, and the irrational, momentum chasing that pushed Wall Street to all-time highs in September 2018 may not be present right now. Fear is diminishing too: the VIX has fallen into the low 15s as of last night – a level also not seen since September 2018. If one were to infer a crude message from current market behaviour, it might be that maybe the Fed-engineered panic in Q4 2018 has been full remedied now. Of course, it was ultimately the Fed which fed to markets the medicine they were craving – the prospect of higher global rates and tighter financial conditions has evaporated. The strength in fundamentals is indeed waning, but appropriate conditions are in place for traders to take greater risks. US stocks recovery possesses substance: Wall Street is registering its best performance in several days on the back of the risk-on dynamic, though it's worth remarking volume has been below average and doesn't do much to validate the market's strength, just on an intraday basis. Market breadth conversely is portraying a broad willingness to jump into equities, with over 80 per cent of stocks higher for the S&P500 on the session -- at time of writing -- led by cyclical sectors and the high multiple tech stocks. What has been encouraging recently about US equities' recovery in 2019 is the substance behind it: the Russell 2000 (a deeper index made up of relatively smaller-cap stocks) is outperforming, and the SMART Money index suggests a market supported by buying from large institutional investors. ASX to be guided by global growth: As a trickle-down effect, the circumstances are favourable for Australian equities too, especially as our central bank joins the chorus of policymakers backing away from rate-hikes. Given the power of the RBA pales in comparison to that of the Fed, supportive monetary policy is eclipsed by the global growth outlook as the major determinant of the ASX’s direction. It does help in a meaningful way that market participants are receiving soothing words from central bankers, especially as our economy shows signs of slowing, as evidenced by yesterday’ weak home loan figures. The proof of what market participants see as the main risk to the Australian economy is in the price action, however: since the “Trump-trade-war-truce” news overnight, implied probability of an RBA rate cut in 2019 is once again back below 50%. ASX200 demonstrates will to power-on: The overnight lead has SPI futures pricing in a 27-point jump at the open for the ASX200. If realized, the index ought to challenge and likely break in early trade the resistance level at around 6100/05. From here, on a technical basis, the market meets a cluster of resistance, established during the period in September 2018 when the ASX traded range bound for the better part of a month. It’s been repeated frequently by the punditry that the market is overbought at these levels. Technically that appears true. But momentum is still in favour of the bulls, so for those with further upside in their sights, perhaps a break and close above 6100 this week could be the signal for some short-term consolidation, before the ASX200 builds strength for its next move higher. Written by Kyle Rodda - IG Australia  

MaxIG

MaxIG

UK Axes Criticised Ferry Contract - EMEA Brief 12 Feb

Another shutdown of the US government has reportedly been avoided in the latest round of negotiations. Following the longest shutdown in the history of the US at the start of this year, the government was opened temporarily whilst budget negotiations continue. US markets had a mixed session yesterday with the Dow down 0.21% but the S&P and Nasdaq marginally higher at 0.13% and 0.07% gains respectively. Could the end of shutdown fears spur a rally in today’s session?  With a subdued session in most of yesterdays major markets, the Nikkei was the stand out from the crowd with a gain of 2.61%. The gain saw the index rebound from its monthly low on the back of strong demand for automakers and machinery makers as well as a weaker yen. UK economic growth over the last 3 months was the weakest since 2012 which is thought to be attributed to global and Brexit worries. Meanwhile, a study has claimed British companies have diverted £8 billion to the EU amid the uncertainty. Brent and WTI were up 0.37% and 0.29% respectively. El Molla, the Egyptian petroleum minister has said that he believes $60-70 is a fair price for a barrel of oil. Gold has firmed slightly following a pull back of the US dollar amid ongoing US-China trade talks London Cocoa was up over 2% yesterday but there are concerns that this may be short lived as it tests its resistance level seen over the past 6 months.  Iron Ore has retreated from its 2 year high following a 20% in the past week. Ocado has begun to claw back some of their lost market cap following last weeks warehouse fire. The food delivery company is now trading at the price it was 2 weeks ago. Plus 500 shares have fallen over 30% following the announcement that they expect to miss earnings expectations which they attribute mainly to tightening regulations by the EU.  Asian overnight: Japanese markets were playing catch up overnight following Monday’s bank holiday, with both the Nikkei and Topix rising 2% over the course of the session. Sentiment is likely to be guided by any developments in trade talks between the US and China, yet at least we are seeing tentative signs of a possible breakthrough in negotiations to avoid another government shutdown. This has helped the dollar to rise to the highest level since December yesterday. However, while a deal appears to have been reached, it is still down to President Trump to approve that deal. UK, US and Europe: In the latest of Brexit woes, a ferry contract has been cancelled with the company Seaborne Freight. The deal received criticism as the company owned no ships and had never ran a ferry service before. A fund of £102 million was used to reduce congestion on the Dover port in the case of a no-deal Brexit. The government asserted that the procurement process which involved companies submitting bids for the funds was done competitively and that the Department of Transport acted transparently. Looking ahead, central bankers are in focus, with appearances from Jens Weidmann, Mark Carney, and Jerome Powell will dominate sentiment. Coming at a time where global growth is slowing and inflation is also on the slide, markets will be watching intently for any more dovish signals from these prominent central bankers. South Africa: Markets have found some solace in news that the US policymakers had reached a tentative deal which looks to avert the commencement of another government shutdown later this week. Markets will now look to the next bout of trade talks this week ahead of the March 1 deadline (before US raises import tariffs again) for resolve on the matter. Our local bourse is trading firmer on the improved global market sentiment although the rand remains weakened as the dollar remains firm. Industrial rand hedge counters have been the play (in the short term) leading our local bourse higher while, financial and retail counters have proven to be more vulnerable to rand weakening. Metal prices trade mixed this morning with precious metals slightly higher and most base metals slightly lower. Economic calendar - key events and forecast (times in GMT)   Source: Daily FX Economic Calendar 11.30pm – Westpac Australia consumer confidence (February): index to fall to 99.2 from 99.6. Markets to watch: AUD crosses Corporate News, Upgrades and Downgrades Nissan's net income for the last quarter fell 76% TUI suffered a fiscal Q1 loss of €83.6 million for underlying earnings, compared to a €36.7 million loss a year earlier. Weather conditions and a weaker pound hit margins. AA said that its motor insurance business saw strong growth for the full year, with policies up 16% to 731,000, but roadside breakdown members fell 2% to 3.21 million. Capital expenditure and full-year earnings are expected to be in line with guidance. Stagecoach has agreed a new short-term rail franchise with the UK Department for Transport, running from 3 March until 18 August. Debenhams has secured financing of £40 million as it looks to renegotiate debts with lenders and accelerate plans for store closures in the latest of British high street stores to face difficulties.  Softbank have invested $940 million in Nuro a self-driving delivery service. Galp upgraded to neutral at Goldman
Leoni upgraded to buy at Quirin Privatbank AG
Polymetal upgraded to neutral at JPMorgan
Rio Tinto upgraded to buy at Goldman BHP Group downgraded to neutral at Goldman
Britvic cut to equal-weight at Morgan Stanley
Spire Healthcare downgraded to underperform at Credit Suisse
Fiat Chrysler downgraded to add at AlphaValue 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. 

IGAaronC

IGAaronC

Settled start to the week - APAC brief 12 Feb

A thus far settled start to the week: It was a day of low activity and mixed results, generally across global markets in the last 24-hours. Equities were patchy in their performance, on much lower than average volumes, while a retracing in bonds revealed stable risk-sentiment. It hasn't been so for some time, but yesterday market participants behaved in a classic "Monday" way. There was a lack of a unifying theme to drive market activity in a macro-sense, leaving traders to trade-off the idiosyncratic stories moving prices region-by-region. Granted, the trade-war negotiations currently going-on in Beijing were of top priority, however the interest in that event extended only as far as speculation by the commentariat. For traders, fresh leads are being awaited, to add some semblance of volatility to the market. Traders awaiting tradeable leads: The data docket is stacked to the end of the week, so perhaps it'll be another couple of days of listless trade before global markets really start to reshuffle the deck. Of course, a surprise could ignite some excitement; but naturally that's inherently unpredictable and difficult to position for. Chinese markets returned to the fray yesterday, adding that lost liquidity from markets. Japan was offline instead, creating some choppy trade in the CHF in very early trade. The reintroduction of Chinese markets may well have soothed the bull's concerns temporarily. After a week away, during which plenty of market moving events occurred, Chinese traders felt it fitting to ignore the noise, and jumped back into stocks, to deliver a 1.82 per cent gain for the CSI300 yesterday. Iron ore prices rocketing higher: Iron ore prices demonstrated best the impact of the return of Chinese demand to markets. Having continued to climb despite the absence of Chinese traders, and in light of further concerns about future production and supply into commodity markets after the tragic Vale dam collapse, iron ore burst out of the gates upon the reopening of the Dalian Commodity exchange. So much so, that on the first tick, the active iron ore contract reached its limit-up level, and effectively froze trade in the market. The price in iron ore is looking aggressively overbought in the short-and-medium term and is likely to attract short-sellers; however, there’s no knowing how long worries about iron supply into markets will linger, meaning countering this trend is not for the faint hearted. ASX200 held together by strength in materials sector: Australian markets are, as one can easily imagine, benefiting from iron ore’s parabolic rise. Despite an overall lacklustre day in domestic equities, during which breadth was quite balanced and volume was below average, a 16-point gain from the materials sector proved enough to staunch much of the ASX200’s losses. On the back of this, today SPI Futures are indicating a 14-point jump at the open for the index, probably once more courtesy of, in a big way, further falls in Australian Commonwealth Bond yields, and the depreciating Australian Dollar. Price action in the short-to-medium term is showing an ASX200 somewhat in no man’s land: at 6060, and with slowing momentum, the market eyes support at 5950, as it pulls gradually away from 6100/05 resistance. Markets keep pricing in weaker Australian growth: The Australian economic growth outlook is still looking clouded. Markets have been leading policy makers on this fact, and after the RBA’s admission last week their growth forecasts aren’t as strong as they once were, traders have taken another leap ahead to price-in weaker growth and inflation, and lower rates for the Australian economy in 2019. The pivotal event to watch will be GDP figures when they are released to gauge the merit of this view; but unfortunately, market participants will need to wait for the start of March to receive that information. The day ahead does contain NAB Business Confidence figures however, which may prove illustrative in a small way how the supply side of the economy views the domestic economy now and into the near future. Greenback rallies on weaker European growth outlook: In reference to currency markets, the US Dollar sustained its rally overnight, as the combination of a desire for safe-haven assets and higher yields push-up the greenback. The conspicuous loser out of this dynamic has been the EUR/USD, which has broken below the 1.13 handle once again overnight. Although they climbed yesterday, the trend lower in European bonds yields looks to be manifesting in the shared currency, as traders price in the prospect of a major European slowdown. The flight to the greenback weighed heavily on commodity currencies, too. The Australian Dollar registered an overnight low of 0.7057, pressured by widening yield differentials, with the spread between the very interest rate sensitive 2 Year ACGBs and USTs widening to 82 basis points.  The UK experiences its own growth concerns: Still in currency land, and the Pound was one of the worst performing G10 currencies overnight, following the release of a slew of weak economic data during European trade. Most conspicuous was the fall in headline month-on-month GDP, which printed at -0.4 per, driving a miss in the more-impactful quarterly figure of 0.2 per cent – a skerrick below the 0.3 per cent that economists had estimated. Remarkably, even in light of the data-dump, which clearly illustrated the sluggishness of the UK economy, interest rate markets scarcely moved. A likely reflection of (an arguably Panglossian outlook for) Brexit expectations, interest rate traders are still maintaining an implied probability of 33 per cent that the Bank of England will hike interest rates before year end. Written by Kyle Rodda - IG Australia

MaxIG

MaxIG

 

Spread of trade wars; Dovish monetary policy; Dollar offsetting influences - DailyFX Key Themes

Don’t Forget Trade Wars Aren’t Isolated to US-China Trade wars remain my greatest concern for the health of the global markets and economy. There have been threats in the past where a localized fundamental virus has turned contagious to the rest of the world by unforeseen circumstances – such as the Great Financial Crisis whereby a US subprime housing derivative implosion infected the wider financial markets by destabilized a foundation built on excess leverage throughout the system. When it comes to trade wars though, there is no need to connect the dots. The systemic implications are apparent. The world’s two largest economies (and markets) are engaged in an escalating ****-for-tat economic conflict. There is little chance that the fallout from such a profound distress would be contained to these two contestants. The United States is the world’s largest consumer of finished goods and China is the principal buyer of the commodities. Whether appetite is trimmed owing to trade policy or stunted economic growth, its smaller trade partners would feel the pain. Yet another organization that is warning over the risks these two are charging was the United Nations whose trade group said further planned escalations could severely impact GDP (it estimated ease Asian economies could drop by $160 billion), trigger currency wars and generally promote contagion. That said, the headlines this past week should raise serious concern among traders. Reports (and remarks) signal the White House does not expect a deal to be struck between the two countries by the end of the 90-day pause on the planned tariff hike. What’s more, sources say President Trump is not going to extend that date and intends to increase the tariff rate on the $200 billion in Chinese imports from 10 percent to 25 percent on March 2nd. That is a severe escalation and one that Chinese officials will not likely take in stride. As tensions rise, there is movement in Congress to curb the White House’s powers to pursue this economic war through its utilization of Section 232 of the Trade Expansion Act of 1962 – this at the same time Trump is attempting to leverage more control. As this effort progresses, it is important to remember that this is not playing out on a single front. Where it seemed that the United States’ pressure on Mexico and Canada via the NAFTA agreement was resolved by the creation of the USMCA, Congress is now signaling that it may reject the effort if material changes are not made. What’s more, we may see the pressure expand yet further. The loose threats by Trump to place tariffs on auto imports have been made multiple times over the past year. A deadline is finally in sight of this threat to potentially gain serious traction. Next Sunday, the Commerce Department is due to give its recommendations following its evaluation of auto imports. Given Secretary Ross’s disposition, it is likely to be a charged report. If the US were to implement tariffs on imported automobiles, the economic and diplomatic impact would be far more significant than what we have seen between the United States and China thus far. Global economic stagnation would follow soon in such a development’s wake.  Paying More Attention to Rates as Outlook Weakens Monetary policy as a financial theme never truly lost any of its influence over the global markets these past years. However, investors’ attention has waned on this critical pillar of speculative reach as appetite for yield has solidified complacency. Yet, conditions are beginning to change with economic activity slowing and volatility in the capital markets picking up. That in turn draws attention back to the backstop that so many have based their convictions – whether they realized it or not. To some, fear that markets are at risk of retrenchment bolsters expectations that the largest central banks are going to step in to temper volatility and lift risk assets by flooding the system with cheap funding once again. For those whose confidence remains, they still consider the likes of the Federal Reserve (Fed), European Central Bank (ECB) and Bank of Japan (BOJ) forces of nature. Closer examination of these groups’ current policies and the available tools still at their disposal, however, should raise serious concern. While the Great Financial Crisis is a decade behind us with growth having stabilized and markets surged in the period since, collective monetary policy has changed little. While the Fed may have raised its benchmark rate range over 200 basis points, none of its largest counterparts have moved significantly off of their own zero bound. Furthermore, there remains an enormous amount of stimulus awash in the system with central banks’ balance sheets bloated with government bonds, asset backed securities and even more traditional investor assets. If push comes to shove and markets started to avalanche lower despite the present mix of support still in place, what would these authorities be able to do muster in order to counterbalance? There is no meaningful capacity to lower global rates and QE has gotten to the point where its effectiveness draws as much cynicism as assurance. Adding more support against a persistently incredulous market would only solidify the realization that central banks are no longer the effective backstop for speculators they once were. And then where do we expect to turn for help? A coordinated effort from global governments when they cannot even maintain existing trade deals? As our markets remain volatile and economic forecasts soften, expect scrutiny over monetary policy and its effectiveness to increase. We have seen that already take place with the market’s response to the Fed’s dovish shift and even the RBA’s and BOE’s growing concerns this past week. Rate decisions, speeches and even data close to policy mandates will leverage greater focus – and likely market reaction – moving forward.  Dollar Can Compensate for Issues By Advancing on Euro, Pound Pain  The Dollar is in a complicated fundamental position. There are numerous domestic issues that represent a serious fundamental weight on the benchmark currency but global troubles will consistently work to counteract the loss of altitude. Of course, the likelihood of a perfect equalization is highly improbable. One development or the other will prove more severe than was expected or the market will decide a particular issue is of far greater consequence to the financial system. It is not clear which node will trigger a tidal wave of capital market flows, so we need to keep tabs on those themes that will exert greater influence on the benchmark as the dominant force will likely arise from these known quantities. On the economic front, the US economy has shown signs of economic slowdown and a sharp drop in sentiment readings from consumers to businesses to investors. This was only accelerated by the US partial government shutdown and the risk that it closes once again is worryingly too high. The stopgap funding runs out on Friday. The delayed economic readings with the status check before the shutdown impact was full felt are starting to trickle out and the GDP reading seems to be due next week. An ineffectual government looks to like it will increasingly be a core issue for the world’s largest economy moving forward with promising programs like infrastructure spending increasingly relegated to the dustbin of unrealized campaign promises. And of course, with the promise of economic wealth fading and sentiment withering, the Federal Reserve’s intention to further raise rates to establish a higher rate of return on US investments will naturally recede. Yet, all of these shortcomings will have powerful relative corrections. While the Fed may very well halt its monetary policy ambitious of the past three years, to stabilize at a 2.25-2.50 percent benchmark range while major peers like the ECB, BOJ and BOE shift to a dovish course from zero rates and expansive stimulus will maintain relative advantage to the Greenback. Should risk aversion build globally, the Dollar has more investment interest premium built up over the past years that could leach away, but a tip into severe risk aversion (which would be difficult to avoid in a committed downturn) would leverage the currency’s absolute haven appeal. What’s more, where the political infighting in the US is more localized, it is not a unique trouble to the United States. Further, it is persistently applying greater pressure on trade counterpart around the world through the trade war. Perhaps one of the truly untested and underpriced risks to the Greenback however is the intentions of the US President. Over the past year, Trump has voiced his consternation over the level of the currency as an impediment to his strategy for course correct trade and perceived inequities to trade partners. In the event of universal risk aversion which puts serious pressure on the global economy, we are unlikely to see an effective collaboration across the world’s largest countries as the game theory in their competitive efforts will more likely intensity under the weight. With demand or Treasuries resulting in a rise for the Dollar, it would not be out of the question to imagine the White House responds with unorthodox policy aimed at driving the currency lower. The real trouble would only begin if the world’s largest player touched off a currency war.

JohnDFX

JohnDFX

Lacklustre Lunar New Year - EMEA Brief 11 Feb

Chinese markets were mixed during the Monday session after being offline for much of last week due to the Lunar New Year holiday. The Shanghai composite gained 0.8% whilst the Hang Send index rose 0.23%. However following Samsung electronic decline of 0.67% the Kospi remained slightly lower after promising recovery from earlier losses.  Oil prices fell over 1% despite refinery fire in Illinois which resulted in shutdown of large crude distillation unit. International Brent Crude futures down 71 cents settling at $61.39 a barrel.  US government shutdown could potentially reoccur as talks between congressional Republicans and Democrats have again broken down with agreement as Trump continues to dig in heals over US-Mexico border wall budget.   Theresa May responded to Corbyn's letter which set out five demands for a Brexit deal, her reply concluded with hope that the two parties could have further talks on the matter.  Nevertheless will Valentines Vote see further love lost between opposing parties?   The Swiss Franc (CHF) saw mini "flash crash" of almost 1% due to Japanese holiday causing thin liquidity. The CHF slid from 1.0004 per dollar to 1.0096 the lowest since November.  Apple verse Huawei war sees the iphone brand's shipment plummet by estimated 20% in last year's final quarter.  Aurora Cannabis Inc is scheduled to announce second quarterly earnings today, However with EFTMG Alternative Harvest ETF and Horizons Marijuana Life Sciences Index  ETF showing larger than 10% drops since October could the cannabis industry be coming down from that original legal high?   Asian overnight: Chinese stocks were the big outperformer overnight as they played catch up following a week-long break. This time it is the Japanese who are away, with National Foundation day seeing markets closed. Elsewhere, marginal gains in the Hang Seng were counteracted by downside in the Australian ASX 200. This is despite the commencement of yet another round of trade talks between the US and China, as both sides seek to find some form of resolution to the current trade standoff ahead of the 1 March deadline. However, with Trump stating that he has no plans to meet Xi Jinping before that deadline, many believe it diminishes the chance of a comprehensive deal to stave off higher tariffs. UK, US and Europe: Looking ahead, a whole raft of economic data from the UK means that the pound will be in focus for traders in the European session. Monthly GDP (December), Q4 GDP, manufacturing production, industrial production, trade balance, and the NIESR GDP forecast for January all tally up to a likely volatile session for UK stocks and the pound. Elsewhere, apart from the Canadian trade balance, this looks like a day largely devoid of any major releases outside of the UK. South Africa: While China and Hong Kong equity markets are firmer this morning playing catch up after being closed for the Lunar New Year's festivities last week, US equity indices are trading marginally lower this morning. This is expectant of a flat to weaker start to our local bourse today. The rand has weakened sharply following news that major power utility would be embarking on nationwide blackouts in lieu of capacity constraints within the country. The dollar has also resumed some short term strength and is weighing on precious metal prices. BHP is up 2% in Australia, suggestive of a similar start for the locally listed entity. Tencent Holdings is up 1.8% in Asia, although this may already be priced into major holding company Naspers. Economic calendar - key events and forecast (times in GMT) 9.30am – UK trade balance (December), industrial & manufacturing production (December), GDP (December): trade deficit to narrow to £1.9 billion, while GDP to growth 0.3% MoM, and at a three month average of 0.3%. Q4 preliminary GDP reading to grow 0.3% QoQ and 1.3% YoY. Market to watch: GBP crosses Source: Daily FX Economic Calendar   Corporate News, Upgrades and Downgrades Acacia Mining said that gold production for the year would be flat despite output beating guidance for 2018 thanks to higher production at its North Mara field. Gold production was 521,980 ounces, above the 435-375 thousand ounce guidance, but down 32% on last year. Telford Homes has acquired a site in Stratford for £20 million. It is expected to provide space for 380 new homes. AAK upgraded to accumulate at Handelsbanken
Bank of Ireland raised to overweight at Barclays
Metro Bank upgraded to hold at Berenberg
Lloyds upgraded to overweight at Morgan Stanley Barratt downgraded to hold at Liberum
Bovis Homes downgraded to hold at Liberum
Petrofac downgraded to neutral at JPMorgan
RBS downgraded to equal-weight at Morgan Stanley 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.

MichaelaIG

MichaelaIG

Facets of the global growth story - APAC brief 11 Feb

Not with a bang, but with a whimper? Without all the fire and fury that we saw in December, markets are pricing in once again a slow down in global economic growth. It could be strongly argued this is evidence of how important US Fed support is to equity market strength – but that’s a drum to beaten (over-and-over-again) for another day. Fundamentally, traders are quietly re-pricing for a world where economic growth will be weaker than once thought. Such behaviour has been long evident in Chinese markets, so there’s nothing new about pessimism in the Asian region. The point of focus now is in Europe, and to a lesser extent North America, which is increasingly demonstrating signs that market participants believe those economies are briskly approaching a period of (even) lower rates, growth and inflation. The many facets of the global growth story: There’s no shortage of causes for this looming slowdown – and in the financial media, each one is getting a good exercising. The trade-war remains the popular one, which is providing a convenient explanation for the confluence of confusing and complex causes for China’s recent economic malaise. This thread gets pulled-on to describe why Europe is feeling the pinch too, being the geography wedged in the middle of the trade-war’s heavyweight combatants. Throw in a sprinkling of Brexit anxiety and internal political unrest in the continent and that’s the story driving Europe’s economic outlook. The US economy is still humming, and the data coming out of the states is still showing a robust economy. Nevertheless, price action says that’s being somewhat ignored, with yields betraying an underling anxiety about economic health. What the bond market is saying: Essentially, it’s all written in yields at present. A few unwanted milestones were achieved in bond markets on the weekend. The most significant was in German Bunds, which saw the yield on its 10-year fall to 0.08 per cent – its lowest point since 2016 – even though rates markets leaving unchanged the implied probabilities for ECB decision making in 2019. 10 Year Japanese Government Bonds are back below 0 per cent, as markets stay resigned to the fact that the Japanese economy will see no signs of inflation for the foreseeable future. And despite there being an absence of data impetus to cause this – other than a general “risk-off” tone for Friday’s trade – US Treasuries climbed as traders priced in the increased chance the Fed will cut rates this year. The RBA adds its 2 cents worth: The market’s central premise that interest rates will need to fall the world-over manifested just as clearly in domestic trade on Friday. The RBA’s Statement of Monetary Policy, released on Friday morning, delivered to markets the material to price in further downside risks for local rates. Following the central bank’s meeting on Tuesday last week, and RBA Governor Philip Lowe’s influential speech on the Wednesday, it’s perhaps a surprise that anymore dovishness from the RBA could be priced into the forward curve. Lo-and-behold, there was, with the immediate reaction from markets towards the RBA’s SOMP to increase rate-cut bets in 2019 to over 60 per cent, bid higher Australian Commonwealth Government Bonds, and to sell-out of the Australian Dollar – pushing the local unit below the 0.7100 handle, subsequently. The RBA’s take on economic growth: It was another softening of the RBA’s economic growth outlook that spurred the flurry of activity. The SOMP was far from a manifesto of doom-and-gloom. However, what markets have for a while been predicting came clearly in the RBA’s opening lines of the document: “GDP growth slowed unexpectedly in the September quarter… The Bank’s growth forecasts have been revised down in light of recent data, particularly for consumption. GDP growth is expected to be around 3 per cent over this year and 2¾ per cent over 2020.” There was plenty of good news contained within the SOMP, it must be stated, especially as it relates to the outlook for the labour market. Sentiment clung to the growth outlook nevertheless, as traders assessed how a global economic slowdown will manifest down-under. The ASX followed global equities lower: The fall in yields on ACGBs and the Australian Dollar proved once again supportive of the ASX200, but the effect was fleeting. It was a bearish day for the ASX on Friday, no matter which way you spin-it. It was simply one of those days for risk assets, as the bulls took themselves to the sidelines for a breather, at the end of a week which was -balance very good for stocks in Australia. Equity market strength throughout last week was perhaps lacking in other parts of the world: Wall Street finished its week higher by a very slim margin, equity markets in continental Europe shed over 1 per cent across the board, the Nikkei dropped over -2.00 per cent, while a weaker Pound kept the FTSE in the green. Price action for the ASX200: The last traded price in SPI Futures is pointing to a 4-point drop at the open for the ASX200 this morning. The market demonstrated some signs of short-term exhaustion on Friday, after its face-ripping rally earlier in the week, as higher than average volumes propelled the index higher. Resistance at ASX200’s September low at around 6100/05 was dutifully respected as the week’s high. The daily-RSI is still in overbought territory, though not flashing a sell-signal nor a major change in momentum yet. The week’s break of the 200-day EMA is seeing that moving average slowly turn higher, which bodes well for the bulls. In the immediate future: the long-awaited pullback could be upon us here, with the November high at 5950 the next logical support level to watch. Written by Kyle Rodda - IG Australia  

MaxIG

MaxIG

Dividend Adjustments 11 Feb - 18 Feb

Expected index adjustments  Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 11 Feb 2019. 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 this week RTY APAM US 13/02/2019 Special Div 103 RTY PRK US 14/02/2019 Special Div 20 RTY PFS US 14/02/2019 Special Div 20 RTY PZN US 14/02/2019 Special Div 46 RTY TLYS US 14/02/2019 Special Div 100 RTY MC US 15/02/2019 Special Div 125
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.

MaxIG

MaxIG

UK economy; could this be the worst year since the financial crisis? - EMEA Brief 08 Feb

Bank of England believes the UK economy is set for the worst year since the financial crisis, as its growth forecasts for 2019 decline from 1.7 percent to 1.2 percent due to a slow economy and Brexit doubt Trump to sign order to ban Chinese telecommunication equipment from US wireless networks May travels to Dublin to discuss Brexit negotiations as she believes a deal could be agreed with Parliament if binding changes can be made to the backstop Asian stocks decline after concerns between the US and China trade war, as Trump refuses to meet Xi before the trade deadline. Hang Seng index fell 0.18 percent, Nikkei 225 by over 2 percent, and ASX 200 decreases by 0.34 percent Oil prices fell this morning; Brent crude futures declined 0.8 percent to $61.14 per barrel along with US Crude futures which slipped 0.85 percent to $52.19 per barrel Amazon founder Jeff Bezos accuses the National Enquirer’s parent company, American Media Inc, of blackmail, as they wanted Bezos to stop investigating how they gathered his private messages of an affair Thai King’s sister enters election as prime minister, breaking the tradition of Thai royalty staying out of politics Tata Motors shares plummet over 29 percent, lowering its current fiscal years profit margin guidance for JLR, following their biggest quarterly loss Sears saved as chairman Eddie Lampert buys the company for $5.2billion through an affiliate of his hedge fund ESL investments, saving around 45,000 jobs Senator Richard Shelby believes congressional negotiators will agree to a deal by Monday, avoiding another government shutdown Asian overnight: Hopes over a positive conclusion to US-China trade talks were dashed when Donald Trump stated that he will not be meeting his Chinese counterpart before the 1 March deadline is reached. Unsurprisingly, the prospect of another ramp up in tariffs between the worlds two biggest countries significantly dented global market confidence, with Asian markets all trading in the red (China remains on a bank holiday). The Australian dollar suffered heavy losses overnight, as the country suffered the same fate as the UK and eurozone after the RBA wrote down growth forecasts thanks to poor prospects for a US-China breakthrough. UK, US and Europe: Looking ahead, a quiet economic calendar sees German trade balance and Canadian employment numbers take centre stage. Also keep an eye out for the latest Baker Hughes rig count. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 1.30pm – Canada employment data (January): 9300 jobs created last month. Unemployment rate expected to rise to 5.8% from 5.6%. Market to watch: CAD crosses Corporate News, Upgrades and Downgrades SSE has cut its earnings forecast due to a delay in receiving government support. Adjusted EPS for the year is now expected to fall 6% to 64-69p, from a previous 70-75p forecast Shaftesbury said that footfall had been ‘robust’ in the run up to Christmas and over the festive period
  Bankia upgraded to neutral at Credit Suisse
Orange Belgium upgraded to buy at ING
Travis Perkins upgraded to outperform at R
Thales upgraded to buy at Citi Centrica downgraded to neutral at Citi
Gem Diamonds downgraded to underperform at BMO
Proximus downgraded to sell at ING
Unite Group downgraded to hold 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. 

KatherineIG

KatherineIG

Brexit is a hell of a ride - EMEA Brief 07 Feb

Theresa May is set to meet with European leaders today to have crucial talks about amending her Brexit proposal with all of the focus on the Irish backstop. She flies to Brussels a day after European Council president Donald Tusk faced backlash after he claimed there is 'a special place in hell for Brexiteers'. The Bank of England is set to announce its rate decision today at noon, with forecasts expecting rates to be unchanged until some of the Brexit uncertainty has passed. US indices closed lower as the DJIA closed 21 points lower at 25390.30, losing a 5-day rally, the NASDAQ closed 27 points lower at 7375.28 and the S&P 500 closed 6 points lower at 2731.61. European stocks closed slightly higher on Wednesday but the markets are still weary about earnings results still to come and the top European indices (FTSE, CAC and DAX) are expected to open lower today. Stocks in Asia were trading mixed today, with the Nikkei 225 closing 0.6% down at 20,751.28 despite Softbank shares rising more than 17% after announcing a share buy-back of up to 600 billion yen in the next year. The Topix also declined 0.83% and the Kospi was trading largely flat. On the other hand, the ASX 200 was trading 1.1% higher closing at 6,092.50. As the dollar index is keeping close to its two week high, gold has slipped to $1,303.64, nearing its lowest point for the year at $1,302.84 on Jan 29. Continuing concerns about a global economic slowdown coming from dovish central bank rate decisions is keeping the precious metal above the $1,300 level. Both Brent and Crude Oil prices have fallen as US crude inventories held production at record highs. Asian overnight: The rally is looking tired, with a mixed session on Wall Street last night, and with little in the way of news for the day ahead equities may continue to struggle. Asian markets were broadly positive, although the Nikkei lost ground.  While China and Hong Kong remain closed on account of Lunar New Year's festivities, US index Futures are trading modestly lower this morning. Metal prices are trading mixed with gold back testing the $1300/oz mark, and platinum testing the $800/oz mark while silver and palladium prices are slightly firmer on the day. Crude oil prices are marginally lower although still trade near multi-week highs. After a broad global bounce in equities, the question is what can now drive stocks higher. UK, US and Europe: As Theresa May is set to fight for a Brexit deal amendment in Brussels today, the Bank of England will announce its rate decision and inflation report at noon. A hard Brexit could see a forced reaction from the policy makers to reduce rates to cope with the immediate disruption to trade and the economy, which would resemble the BoE's reaction to the shocking Brexit results where it introduced a quantitative easing program and cut rates by a quarter of a point. Nevertheless, it is expected that the BoE will hold any rate changes until some uncertainty clears. But leaving the politics aside, the monetary policy committee may be confident that growth and inflationary pressure are strong, which could signal that there will be gradual rate hikes post Brexit. The cable is the currency pair to watch after the announcement, as the greenback remains as the safest currency, a dovish approach from the BoE signalling to further economic concerns due to the uncertainty of Brexit 50 days out from the leaving date, could mean the GBP/USD may be testing the $1.28 line. South Africa:  The rand has weakened against a rebound in the dollar. South Africans will look to this evenings State of the Nation address for news relating to an Eskom bailout and possible effects on the rand. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 12pm – BoE rate decision & inflation report: no change in policy is expected, though with no progress on Brexit it will be interesting to watch the MPC’s views on the UK economy. Market to watch: GBP crosses 1.30pm – US initial jobless claims (w/e 2 February): previous week’s reading 253K. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades Bellway said that it expects a 12% rise in total revenues for the first half, helped by higher average selling prices. Completions rose 5.6% while the average selling price was up 6.5%. Compass upgraded its outlook for the full year, expecting organic growth to come in slightly above the mid-point of guidance. Organic revenue for the final quarter of 2018 was up 6.9%. Thomas Cook is exploring the sale of its airline business in a bid to raise cash. Q1 underlying losses rose to £60 million, from £46 million a year earlier Alstom upgraded to buy at Berenberg
BT upgraded to buy at DZ Bank
Daimler upgraded to hold at Commerzbank
Volvo upgraded to neutral at Baird Infineon downgraded to hold at DZ Bank
Lundin Petroleum cut to hold at Kepler Cheuvreux
Munich Re downgraded to hold at DZ Bank
Repsol cut to equal-weight at Barclays 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.

DanielaIG

DanielaIG

ASX overbought; but clear-air ahead APAC brief 7 Feb

ASX overbought; but clear-air ahead: The ASX200 ought to add another 22 points this morning, according to SPI futures. There is a lot of enthusiasm about Aussie stocks presently – something surely attractive for the contrarians who like to run counter to prevailing market sentiment. It’s been said so much that it’s become facile: a pull-back must come soon to test the strength of the market’s recovery. Of course, it is a matter of when this eventuates – timing is always the toughest thing to predict in financial markets. The ASX200 has become technically overbought on the daily-RSI; however, by that measure, momentum is still intact and pointing to an uptrend. Clear air exists for the market now too, with the next resistance level sitting slightly above 6100. ASX has the wind to its back: It’s often said that compared to other major indices, the ASX200 is a trifle boring to trade. It’s a simple formula, well known to most: get a view on the banks, and get a view on the miners, and you’re almost the whole way to knowing where the index will go. The bulls were thrown a bone on both fronts this week. The soft-touch (“pragmatic” is the word being used) recommendations contained within the Hayne Report has set a fire under bank stocks; and the parabolic rally in iron ore prices has the big-miners looking like an attractive long-proposition. It must be stated the market’s rally is broad-based, with volume and breadth in the market solid. But that had already been so, so-far in 2019: it meant little without the bank-bulls charging. Banks rally, but fundamentals questionable: The rally in the banks this week is arguably in large part a “catch-up” rally – the financials sector had been the only sector in the red for 2019. Bank stocks weren’t being touched, despite the bullish macro-drivers in global equity markets. But with this week’s rally, financials are up 4.50 per cent, against an overall index return of 6.7 per cent; perhaps the banks have rebalanced now with where the ‘big-picture” suggests they ought to be. The next question is however, what upside exists for the banks based on their fundamentals? This will take time to flesh-out, as each of the Big-4 progressively update the markets on their performance – and especially as the political cycle turns the findings of the Hayne Royal Commission into an election issue. CBA the first to show cards: Markets did receive their first insight into the financial state of the nation’s banks; and fittingly it was the CBA yesterday morning that provided their half-year results. The figures released spoke of a bank de-risking in the face of regulatory pressure, being stifled by higher global funding costs, and struggling with the Australian property market’s downturn. The ratio of Tier-1 capital the bank is holding climbed to 10.8 per cent, and its net-interest-margin shrunk by 4 basis points. Not a disastrous result by any means, however given that credit growth in Australia is still slowing, and the domestic property market seemingly has further to fall, suggesting a turn in the multi-year downtrend in the CBA’s share price will reverse because of diminished of regulatory-risk seems fanciful. The RBA becomes “balanced”: The concerns confronting the banks and the Australian economy (as a whole) were addressed in a speech delivered by RBA Governor Philip Lowe yesterday. His view on the economy was decidedly more “balanced” – as the Governor himself explicitly described – than what it had been at any stage in 2018. It was a refreshing take, however one that got market participants moving. What’s been inferred from the speech, is that given the slowdown in the global economy, weakening domestic demand, and issues in consumer credit and the property market, the chances for a rate hike are now even with that of a rate-cut. Gone is the rhetoric that “the next move in interest rates is likely to be higher”: the RBA, for all its optimism, is on standby with policy support if economic conditions deteriorate. Australian bonds and the AUD: As one can imagine, the Australian Dollar hated the change in the RBA’s outlook. It was the worst performer of all G10 currencies yesterday, diving to an overnight low of 0.7110 against the greenback. The probability of an interest rate cut at some point in 2019 has spiked, to effectively a 60 per cent implied probability. Australian Commonwealth Government Bond yields tanked consequently, with the 2 Year ACGB tumbling 10 basis points, and the 10 Year ACGB shedding 8 points. The fall in yields, though being brought-about by a less-rosy outlook for the economy, is probably supportive of the ASX for now. The drop-in discount rates have made valuations marginally more attractive, while more significantly, the lower Australian Dollar has visibly provided a boost to the market in the short-term. Powell and the BOE the highlights today: With less than an hour to trade, Wall Street looks as though it will finish in the red today, following a weak day in European equities, and a solid day across Asia. Overnight news-flow was bereft of market moving headlines, so traders look to the next 24 hours for inspiration. US Fed Chair Jerome Powell speaks today (11.00AM AEDT), but the big focus may well be on the Bank of England tonight. The GBP has lost its lustre this week, as markets come to the realization that a no-deal Brexit is a higher likelihood than what was being priced-in. The BOE are hamstrung at-the-moment, unable to shift policy stance until a Brexit outcome is known. An optimistic but idle central bank is to be expected until it is. Written by Kyle Rodda - IG Australia  

MaxIG

MaxIG

Beauty and the Beast; Disney beat earnings whilst Snap posts 4 cents per share loss - EMEA Brief 06 Feb

Despite announcing a loss of 4 cents per share Snap shares soared in after-hours trading as the social media giant beat analysts expectations, the general consensus was that the company would report a net loss of 8 cents per share in Q4.  Disney also beat expectations aided by the launch of its streaming service ESPN+ and sales increases in its theme park businesses, earning per share came in at $1.84 vs $1.55 expected. The Dow rose by 172 points, followed by a 0.47% increase in the S&P fueled by gains in the communication services and technology sector. The Nasdaq also saw a gain of 0.7% and closed at 7,402. President Trump announced on Tuesday that he will meet with Kim Jong Un in Vietnam at the end of February. Although progress has been made, the president believes a lot of work still needs to be done. Overall, we saw a largely subdued session in the Asian market due to the Lunar New Year holidays, with the exception of moves in the Australian markets. The Australian dollar fell by almost 1.3% against USD as the Reserve Bank of Australia said that rates could fall if unemployment increases and inflation stays too low. Gold slipped to $1,314.30 per ounce, a 0.1% drop from its previous close. Asian overnight: A somewhat subdued session overnight saw marginal gains in the ASX 200 and the Nikkei, while the Topix lost ground. Chinese and Hong Kong markets remained closed for the Lunar bank holidays. The Australian dollar was the big mover overnight, after the RBA governor Lowe signaled that the next move could be to cut rates rather than raise them. Meanwhile, Donald Trump’s state of the union address provided little of note for markets, with the President focusing on further promises to build a wall rather than laying out solutions to the impasse in US-China trade negotiations. UK, US and Europe: Trump addressed Congress during his second State of the Union on Tuesday night, announcing that he will meet the North Korean leader between the 27th - 28th of February. The two leaders met last year in Singapore which, according to Trump, was a huge success as he claimed that North Korea's nuclear weapons were no longer a threat to the US. In his address he acknowledge that there is still a lot of progress that needs to be made between the two countries, but claimed that "If I had not been elected President of the United States, we would right now, in my opinion, be in a major war with North Korea". Looking ahead, the early release of German factory orders represents the sum total of a quiet European session. Meanwhile, US trade balance, alongside US crude inventories provide the only major releases to watch out for in the afternoon.  South Africa: US Index futures are pointing to a flat start to the day. The Shanghai Composite and Hang Seng Index are closed this morning on account of Lunar Holidays being celebrated within the region. With market moves minimal this morning there appears to be little in the way of scheduled news data to guide markets for the rest of the day. Commodity prices are relatively unchanged this morning and the rand trades at similar levels to where it closed yesterday. The BHP Group is up 1.67% higher in Australia suggestive of a positive start for local miners. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 1.30pm – US trade balance (November), GDP growth (Q4 preliminary): trade deficit to narrow to $54 billion from $55.5 billion, and GDP expected to grow by 2.6% QoQ, from 3.4%. Markets to watch: US indices, USD crosses 3pm – Canada Ivey PMI (January): previous reading 59.7. Market to watch: CAD crosses 3.30pm – US EIA crude inventories (w/e 1 February): stockpiles rose by 919,000 a week earlier. Markets to watch: Brent, WTI Corporate News, Upgrades and Downgrades Apple has announced its retail chief, Angela Ahrendts, is set to leave the company in April citing "new personal and professional pursuits" as the reasoning behind her move away from the tech giant. Toyota cuts it net income outlook for 2019 due to "changes in US taxation rules" and "losses from equity sales". Severn Trent still expects to report full-year performance in line with forecasts, with its biggest capital spending plan in a decade on track.  Redrow said that pre-tax profit rose 5% to £185 million for the first half, while revenue rose 9% to £907 million. The dividend was raised by 11%, to 10p per share, while a cash payment of 30p per share will also be paid.  Victrex suffered an 18% fall in first quarter revenue, due to weakness in the automotive and consumer electronics markets. The firm said that it had seen some improvement in January and February.  Profits at Daimler, the owner of Mercedes-Benz, decreased by nearly a third last year as earnings came in at €7.6bn down from €10.6bn previously. Interserve has announced this morning that they have reached a deal with creditors to cut its debt by issuing new shares through a rights issue, indicating that it will reduce liabilities by around £325m Alstria Office upgraded to buy at Kempen
BP upgraded to buy at DZ Bank
National Grid upgraded to outperform at RBC
Paddy Power upgraded to hold at HSBC EON downgraded to underperform at Jefferies
LVMH downgraded to hold at Jefferies
Royal Mail downgraded to sell at SocGen
TUI downgraded to hold at HSBC 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.  

GeorgeIG

GeorgeIG

The bulls keep control - APAC brief 6 Feb

The bulls keep control: SPI futures are indicating that the ASX200 will climb another 20 points at the open, adding to yesterday’s bank-led 1.95 per cent rally. Another solid day on Wall Street can also be pointed-to for the market’s start in the green, with US shares continuing their run-higher. Quietness in Asia courtesy of the Chinese New Year holiday has kept some negative headlines way, aiding the bullishness. Global bond markets are steady, gold is off its highs, and credit spreads keep narrowing. Locally, the RBA’s optimism also gave the Aussie Dollar a kick-higher and lifted domestic yields. It’s a risk on attitude, for a multitude of reasons, here and abroad. There’s so much reason to be wary in markets currently; however, the bulls have seen enough to take a gamble in this environment. Some classic-cases of can-kicking: One lesson from financial markets in the last week: no person wants to be the one responsible for making necessary changes to something in the long-term, if it means inflicting pain in the short-term. It’s a characteristic of human fallibility and is arguably evidence as to why when crises occur, they tend to hurt more than perhaps what is necessary. There is a parallel with what we’ve seen in the US in the last 7 days, and what has transpired in Australia this week. In the US, it was US Federal Reserve Chairperson Jerome Powell wilting under the pressure of Wall Street in his bid to normalize interest rates. In Australia, it was the Hayne Royal Commissions failure to make the necessary systemic changes to improve the nation’s financial system. An invidious dilemma: When presented with the opportunity to make meaningful, structural change, individuals back away from doing so, to clear themselves of culpability for instigating a crisis. Sympathy to these folks who are handed the crushing responsibility of making these invidious decisions. Surely any other rational person would behave and make choices in the same way if put in a similar position. But removing single agents from the equation, and it becomes the case our human-systems remain tremendously difficult to reform without seeing them collapse first. People are motivated by short-term incentives, it ought to be inferred, and will seemingly (more-often-than-not) act according to those incentives, even if it means perpetuating a system that is dysfunctional, or worse, perhaps even immoral. No-one wants to be the fall-guy: One can make a blanket, high-level assertion as to why this is so. Our social, political and economic systems are entrusted to people whose mandate is to either ensure compounding prosperity, and a progressive and inexorable improvement of quality of life. When single individual’s take temporary control of a system that will outlast their tenure, they are incentivised to use it to serve their most immediate interests. For the people in power, it doesn’t matter so much that by failing to take responsibility now, they are adding to the grief to be worn by those in the future. It’s better for them to keep the machine rolling and take a gradualist approach of incremental (and superficial) change, even if it means compromising in the future what is being fought to preserved in the present. No-one benefits (now) from change: But sometimes, like the broken fridge that keeps needing its parts replaced bit-by-bit to keep it alive, it’s better to throw the whole machine out, even it means going without food for a day. The actions we saw out of the Hayne Royal Commission, for one, amounts to the tinkering of the system, without fixing the whole thing. An oligarchy of private banks has proven to be socially disruptive, but to break up what some call the “cartel”, it would mean major financial and economic disruption. Credit growth would go cold, pressuring the property market and the broader-economy that relies upon it; bank shares would depreciate and erode wealth, weighing on people’s future prosperity; and the Government’s coffers would become emptier, meaning it could do less to serve the nation. When it’s good, it’s fine; when it’s bad, it’s too late: As alluded to earlier, the phenomenon witnessed in the fall-out of the final Hayne Report can also be seen in the decision-making of the US Federal Reserve recently. For years, global asset markets have prospered courtesy of the innovative practices central banks have used to support a system that is disposed towards chaos. The pain of making true systemic change is deferred, to keep in place order and stability in the present. When it becomes necessary to unwind some of these practices, when it is justified, if not necessary, just like we have seen in the US recently, the prospect creates convulsions and disarray. Although it’s known that long term objectives will be compromised by short-termism, immediate self-interest once again comes to the fore, and bastardizes the process. Instant Karma is (not) going to get you: So much of what happens in financial markets is driven by short-term benefit, in the (often) naïve hope that when things turn truly bad, you’re not the one left carrying the can. Hence why Wall Street has rallied the way it has since the Fed took its dovish turn last week, and why the banks (and therefore the entire ASX) experienced its extraordinary rally yesterday. Market participants are enjoying their spoils now, in the knowledge that if they don’t, they’ll miss-out on the opportunity to take a slice of the good times while they are still on the table. It’s well known certain things need to be fixed, but no one wants to forego short-term benefit, or be the one responsible for bringing about short-term pain, so the system rolls on. Written by Kyle Rodda - IG Australia  

MaxIG

MaxIG

A to Z: Alphabet Falls Over Rising Costs - EMEA Brief 05 Feb

Alphabet, Google's parent company, saw its share prices fall over 3% in extended trading on the back of continuing pressure on advertising prices and decreasing margins - adding to the concern over the company's periodic surges in spending. This comes despite the company beat expectations across the board in its Q4 results.  Theresa May will travel to Ireland today to try to ease concerns over a hard border situation in Ireland upon Brexit. Meanwhile, UK Steel has warned that a no-deal Brexit would severely impact the British steel industry, worth £2.8bn a year in sales. The US Fed's Chairman, Jerome Powell, has signaled that the rate hikes and balance sheet tightening may be coming to a halt amid a concerning outlook for the US economy due to global growth and trade wars.  The S&P 500 ended 0.7% higher to claim its fourth successive daily gain. Australian equities jumped 2% as a government-appointed inquiry scoured the country's financial sector for misconduct, leaving the banks to rise. Japan's Nikkei ended the day down 0.2%. Markets across most of Asia were offline for Lunar New Year.  The AUD strengthened after the Australian central bank halted interest rate changes, noting uncertainty over falling house prices. The currency ended 0.5% higher at $0.7263. The pound and the euro both remained steady at $1.3040 and $1.1431, respectively.  Brent Crude rose 0.4% to $62.75 a barrel, whilst Gold was up 0.2% to $1,314 an ounce.  Asian overnight: A thin Asian session saw Australian stocks rise sharply amid a gains for the financial sector and the miners. Chinese and Hong Kong markets remained closed for Lunar New Year, with Japanese stocks trading somewhat mixed over the session. The Australian dollar gained ground following a decision from the RBA to retain rates at 1.5%, while their trade balance rose to the second largest surplus on record. However, much of this was thanks to a huge fall in imports; the largest one-month fall in imports recorded. UK, US and Europe: Looking ahead, the UK services PMI looks set to be the big release to watch out for, following on from worrying manufacturing and construction sector surveys. With the UK economic growth picture hugely reliant upon the services sector, today’s figure will have significant implications for Q1 growth. That services theme continues into the afternoon, with the US non-manufacturing PMI reading expected to tick lower. On the corporate front, watch out for numbers from Walt Disney and Snap. South Africa: Global markets are trading flat to mixed this morning with Hong Kong and China closed for the Lunar New Year festivities. Oil has started to rise again with an embargo on Venezuela's largest oil producer and OPEC production cuts providing some of the short term excuses for the move. The rand remains firm against the dollar, while metal prices are mostly firmer this morning. The BHP Group is up 1.1% in Australia, suggestive of a positive start for local miners. Anglo American Platinum has released a strong trading update which is expected to further bouy platinum miners this morning, following on from yesterday's upbeat report from Impala Platinum . Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 9.30am – UK services PMI (January): previous reading 51.2. Market to watch: GBP crosses 3pm – US ISM non-mfg PMI (January): forecast to fall to 57.5 from 58. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades Tesla has agreed to buy Maxwell Technologies in a $218m deal, in an attempt to lower the cost of car batteries. Ocado reported a loss of £44.9 million for the year, from a £9.8 million loss a year earlier. Sales were up 12% to £1.48 billion, and the firm expects the retail sales business to report growth of 10-15% in 2019. BP said that replacement cost profit rose to $12.7 billion for 2018, compared to $6.2 billion a year earlier. Upstream production rose 8.2% over the year, and the dividend was raised by 2.5% to 10 cents per share. Centrica has signed a long-term supply deal for liquefied natural gas with a planned project in Mozambique, as it looks for new sources of fuel as North Sea output declines. St Modwen Properties reported a 4.3% rise in net asset value per share, to 470.4p, for the year through to December. The dividend was raised 13.1% to 7.1p per share. Cobham upgraded to hold at Kepler Cheuvreux
Wirecard upgraded to buy at LBBW
Morrison upgraded to buy at Berenberg
Orpea raised to buy at Kepler Cheuvreux Carlsberg downgraded to neutral at Oddo BHF
Lundin Petroleum downgraded to hold at HSBC
Merlin downgraded to hold at SocGen
Segro downgraded to hold at SocGe 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.

JoeIG

JoeIG

 

US government shutdown ends; Brexit Plan B vote; heavy data week - DailyFX Key Themes

With the Fed’s Language, Global Central Banks Signal Softening Policy Global monetary policy has shifted more noticeably to the dovish extreme of the scale over the past months, but investors were overlooking this questionable support because the markets were under serious duress. Yet, after the three-month tumble leveled out into a meaningful recovery into January, market participants began to look for fundamental reasoning to justify their growing confidence for their exposure. With the Fed’s unmistakably dovish transition between the December and January policy meetings, conviction in central bank support started to return to levels that mirrored the zombie-like reach for yield that defined the low-volatility, steady climb assets between 2011 and 2015. The terms of ‘plunge protection team’ and ‘QE infinity’ as applied to the world’s largest central banks are frequently voiced as skepticism by those that think extreme accommodation is ineffective and far more costly than central banks and the average investor appreciates. However, those phrases are just as significant to the bulls who have grown to depend on group’s like the Fed to keep an artificial calm over the financial system. There is good reason to believe the US central bank has taken a meaningful turn in its policy regime. The December Summary of Economic Projections (SEP) lowered the 2019 forecast for rate hikes, but last week’s rhetoric made clear that the water mark for even a single hike this year is likely beyond the reasonable threshold. The US central bank is only signaling a curb to future plans of rate hikes following 225 basis points of tightening, but that is arguably one of the biggest alterations of course that we’ve actually seen. There is little mistaking that the course is such that the comfort in slowly normalizing extreme policy easing has all but vanished amid slower growth, breaks in global trade and threats to financial stability. That will incur more concern amongst those in the markets than speculative opportunism. Benchmark risk assets are not trading at a value-based discount and our proximity to the extremes of traditional as well as unorthodox policy will curb hopes for the recharge for milestones like the S&P 500 to make it back to record highs – much less surpass them. Of far greater concern in monetary policy in my book is the consensus recognition among investors that central banks have no recourse to fend off a genuine crisis should the need arise. And, if we follow this path, the need will come. Only the US central bank has any leeway to purposefully lower rates, and that is only 2 percentage points to return to zero where the economy would once again find itself stuck in a financial hole. Returning to active stimulus expansion will only lead down the same path that the Bank of Japan has already found itself lost upon. The BOJ is stuck tying bond purchases to its 10-year Japanese Government Bond yield with no sign of reliably faster growth or sustained pressure for inflation to return to its target. The lack of traction for Japan’s central bank already draws enough unwanted attention to the state of monetary policy. If similar acknowledgement of a permanently disabled tool spreads to global monetary policy, we will find no other probable means to stabilize a market crash or economic slump by officials’ means alone.  With Sentiment on the Upswing, Expectation Rise for Trade Wars We have seen a few of the more pressing fundamental threats to the global order abate over the past few weeks. It comes as little surprise in turn that sentiment in the market has improved in tandem. A slow normalization of monetary policy was seen as a slow strangulation of stubbornly nascent growth. With the Fed, ECB and others signaling their submission to the rise of external risks and stalling economic measures; the leash on speculative excess has been let out a little. Another point of perceived improvement comes from the end of the US partial government shutdown the week before last. After a record-breaking, 35-day closure that cost the economy an estimated $11 billion – a hefty portion that will prove permanent – this large component of economic activity is once again contributing to expansion. Of course, there are a number of caveats associated to this situation that should leave traders uneasy such as: the threat that the shutdown could be reinstituted by the middle of this month; that the tangible impact on the economy may have pushed a tepid expansion into a stalled or contracting economy; as well as fostering a collapse in sentiment around a government incapable of finding critical progress when it may be most necessary (such as in the emergency of a crisis). More generally, these improvements are notable the lifting of a fundamental burden imprudently applied to the system rather than a genuine upgrade to the outlook. How much growth and opportunity can we expect from the correction of errors? Well, at the moment; the answer to that question is: at least a little bit more. With these and a few lesser issues throttling back the burden, the markets will be monitoring for what other temporary boosters can earn a little further stretch. One of the most extensive threats to arise this past year with an explicit price tag attached to it has been the trade war. While there are multiple fronts to this effort to grow at the expense of trade, there is no skirmish more costly than the standoff between the United States and China. With tariffs on over $350 billion in products, we have seen sentiment and growth measures on both sides deteriorate. However, rhetoric surrounding the discussions between these two powerhouses has recently elicited more enthusiasm from officials and the market. This past week’s discussions between the Chinese Vice Premier and a delegation of key people from the US (Trade Representative, Treasury Secretary, Commerce Secretary) was said to have gone well and that the conversations would continue in China shortly. Never mind that there were no tangible policies suggested nor that President Trump said he would likely keep to a tariffs hike at the end of the 90-day pause as of March 1st. With speculative assets on the rise and market participants believing that officials are doing what is necessary to foster buoyancy in benchmarks like the S&P 500 (speculation the Fed capitulated in the market slump while Congress and the President surrendered in order to avoid the negative weight), it stands to reason that the White House would divert its trade course to afford further gains. In the end, though, these will still be temporary gains.  How Important is this Week’s Bank of England Rate Decision? When it comes to the British Pound the principal fundamental concern remains the uncertainty that Brexit poses to the UK economy and financial system. This is more troubling for investors – foreign and domestic – than something more targeted and acute like a stalled GDP reading. There is no doubt that a halt to growth is a problem, but the issue would be a known quantity. From the details provided with the general update, we would know where policy and support would need to be targeted to course correct into the future and investors could still identify opportunities from those areas of the economy which are still progressing or are likely to do so from a temporary discount. When we are dealing with a complex and unwieldy situation like the UK’s divorce from the EU with a distinct countdown (to March 29th) and the sides obstinately at odds with each other, it can be extremely difficult to confidently assess the risks of your exposure. This same contrast will exist with the upcoming Bank of England (BOE) rate decision on Thursday. The central bank is very unlikely to change its key lending rate at this gathering and rates markets reflect that belief. However, this is one of the more nuanced gatherings with the inclusion of the Quarterly Inflation Report. The update includes pertinent information to assess the outlook for the economy and financial system – which Brits and investors are desperate for at the moment. Their growth assessment will no doubt reflect some of the troubled figures that we’ve seen via various timely sector updates. Further, acknowledgement of external risks and ongoing Brexit fallout (such as surveys showing businesses are actively looking to relocate or considering it) will be a central element to the update. Yet, will it be market moving? Governor Carney and his crew have warned of the risks to a ‘no deal’ split for some time now, and we have seen the market’s reaction to their concerns drop steadily over time. It is the case that the Pound’s recent climb these past weeks poses as certain degree of premium that could be cut down by otherwise routine concerns. However, if I were to see a headline suggesting a breakthrough or overt block in the dialogue between Prime Minister May and her EU counterparts, I would expect it exert far greater influence over the Pound than what the BOE could reasonable do. 

JohnDFX

JohnDFX

Global markets - APAC brief 5 Feb

Global markets relatively still: Wedged between the beginning of Chinese New Year and Superbowl Sunday in the US, financial markets, on a global scale, have been a relatively quiet place in the past 24-hours. The excitement, anxiety and anticipation that has catalysed movement and activity in global markets lately was noticeably absent. Last week was a hard act to follow, what with the Fed, US corporate earnings, trade-war negotiations, Brexit, and a litany of fundamental data to keep traders occupied. Not to mention that being a Monday, news flow in the financial press is always a little lighter than what it is the rest of the week. Overall, the major equity markets in Asia closed in the green yesterday, Europe was on-balance lower come the end of the session, and Wall Street should finisher the day higher. The Hayne Report handed-down: Considering the quietness – and as this is being written, the hope is US President Trump keeps his fingers away from Twitter – it provides a good opportunity to pop-on the parochial Australian hat and look at how local markets are evolving. In a reasonably significant way, Australia was where the locus of interest lay, if only in the Asian session, during yesterday’s trade. The final report of Kenneth Hayne, QC’s Banking Royal Commission had Aussie markets on edge throughout the day; and had global investors curious as to what game-changing findings would come out of the report. The pre-positioning in the morning’s trade had the ASX experiencing much larger volumes than the average Monday, though that petered out as the session unfolded and attention turned to simply awaiting the report’s release. The initial reactions: Avoiding the legalese and focusing simply on the initial market sentiment, and it might be fair to say that investors are quite pleased with the findings handed down in the final Hayne Report. It’s only a very early indicator, and the move was modest, but upon re-opening yesterday afternoon, SPI futures registered a quick 12-point jump after digesting the report’s findings and the subsequent Press Conference addressing them from Treasurer Josh Frydenberg. The move was pared as the European and Middle Eastern markets took control of price action. However, what the activity reveals is that the emotional money – the one that reacts straight-out-of the gates to news and noise – judged what was contained and prescribed within the Hayne Report as being on-balance beneficial to bank stocks. Smart money buying bank bargains? Taking a slice of Wall Street’s overnight upside as well, and SPI Futures at time of writing are pointing to a 28-point jump at the open for the ASX200. During intraday trade, the ASX managed to deliver a positive day for market-bulls. Whipsawing for the first hour of trade, the bulls took control of the market as the day unfolded, led by the bank stocks, which added over 17 points to the ASX200 by the day’s end. The price action screams of the classic “dumb-money-versus-smart-money” dynamic: the dour headlines about the Royal Commission spooked the emotional retail investors, who sold at the market’s open and pushed the price lower, only to establish better buying conditions for the “smart” institutional investors, who bid the banks and the index higher throughout the day. The banks avoid the worst-case outcome: Given the activity in futures, the market reaction could simply be a matter of “buy the rumour and sell the fact”, as the cliché goes. Alternatively, it could be a sign that market participants believe the 76 recommendations in the report were a little softer than expected on the financial services industry. Looking at what was recommended, and the kind of structural change that some pundits were calling for did not get mentioned. In short: the banks won’t need to be broken apart, and ASIC and APRA will remain the “two-peaks” of the regulatory framework. Most of the pain falls upon mortgage brokers and financial planners, with the general intent of the recommendations looking at existing laws and institutions to kill dodgy sales practices, abolish perverse remuneration programs, improve financial advisory practices, and hold future wrong doers to account. Credit and trust: The Royal Commission itself, we’ve been told, is to restore trust in the banking system, while ensuring ample credit-conditions and the necessary competition remain in the financial system. It’s always a poetic reminder: the origins of the word credit come from the Latin word “credere”, which means to “believe” or to “trust”. The extension of financial credit – the thing that invents and keeps capital in the world moving around – is essentially an exchange of trust. Fortunately, given what’s been revealed the Banking Royal Commission, consumers need not believe in the goodwill of a monolithic institution to extend their trust to it. We have legal coercion instead. The hope is now, out of all of this, even if power isn’t redistributed by breaking-up the banks, the legal institutions who are there to “keep the bastards honest” start doing their job. RBA day and Retail Sales: Staying focused on the fortunes of the Australian economy, the day ahead will be headlined by local Retail Sales data and the RBA’s first meeting for 2019. It’s a fitting mix, considering the major risk to the domestic economy and RBA policy, given mounting household debt, sluggish wages growth and falling property prices, is the strength of the Australian consumer. Today’s meeting from the RBA is the first we’ve formally heard from the central bank since the start of December. Given the many developments in the world economy since then, there will be plenty for the RBA to catch-up on. They won’t move rates today; that much is known. But the guidance moving forward is key, with rates markets still pricing in a 40 per cent chance of a rate cut this year. Written by Kyle Rodda - IG Australia

MaxIG

MaxIG

Markets prepare for the Lunar New Year - EMEA Brief 04 Feb

Asian equities are modestly up as investors price in strong US job report and president Trump’s optimism on trade talks. The top performer was Japan’s Topix index which was up 1% at 3:32 GMT, following a weaker Yen. Major markets across Asia will close for part or all of the week as the region heads into Lunar New Year holidays. India NSE Nifty 50 is down 0.5% as of 5:15 GMT as investors evaluate the populist push in the government’s last federal budget. India is set to cut taxes to middle-class citizens and distribute cash to farmers in an attempt to restore confidence in the middle-class. The dollar held Friday gains against the Yen, which followed a better-than-expected US job report. However, caution towards subdued holiday trade in Asia and Federal Reserve policy might hold back further gains. The greenback is up 0.21% at 109.75 as of 5:30 GMT on the IG Web platform. Gold prices edged lower as the greenback held steady. The April contracts hit $1317 at 5:00 am GMT, after dropping consistently since opening, as can be seen on the IG Web Platform. Will fewer expectations of Fed rate cuts this year push the gold bullion much lower?  Oil maintained gains from the previous session as markets participants weigh in OPEC production cuts vows and US sanctions against Venezuela. International Brent Crude oil futures were up 1% from their last close, trading at $62.76 per barrel. Vivek Dhar, commodities analyst for Commonwealth Bank of Australia commended that US sanctions on Venezuela “could see 0.5 to 1 percent of global supply curtailed”. Asian overnight: Asian markets are trading firmer this morning following on from gains in US markets on Friday, as optimism around trade talks between the US and China grows. Japanese markets were the outperformer overnight, as a bullish start to the week took hold despite the absence of Chinese trade (Spring festival). Today's economic calender is light and market moves are relatively subdued. China is currently getting ready for its Lunar New Year's celebrations. Data-wise, the Chinese Caixin services PMI fell less than expected, maintaining a healthy 53.6. Tencent Holdings is down 0.1% in Asia suggesting a flat start for major holding company Naspers. BHP Group is flat in Australia. UK, US and Europe: As May will launch today a new working group intended to look for a Plan B on Brexit, Nissan Europe Chariman Gianluca De Ficchy ditched commitments to Britain after the divorce with EU. According to the Times newspaper, British ministers are now considering whether to withdraw a 60 million pounds package to the Japanese car manufacturer. Despite the fact that the Brexit storm seems far from over, cable volatility traders appear bullish on a positive divorce scenario as pound volatility keeps dropping. According to SEB AB, given the risk of a no deal scenario, investors may have to reconsider their optimistic positions. Looking ahead, a relatively interesting day on the economic calendar sees the UK construction PMI take the lead in Europe. Th rest of the focus is on the US, with factory orders, trade balance, durable goods, and retail sales figures all released. Also keep an eye out for the Q4 earnings figures from Alphabet. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 9.30am – UK construction PMI (January): previous reading 52.8. Market to watch: GBP crosses 1.30pm – US retail sales, housing starts & building permits, durable goods orders (December): retail sales to rise 0.2% month-on-month (MoM), and durable goods orders to rise 1.8% MoM and rise 0.3% MoM, excluding transportation. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades Serco said that it had won a £560 million contract with Bupa to provide services to Australia’s defence forces. The contract is for six years, plus up to four one-year extensions.  Indivior has entered into an agreement to sell its rights to a psychotropic drug in China for up to $122.5 million.  Ryanair reported a 9% rise in revenue for the final three months of 2018, to €1.53 billion, but suffered a pre-tax loss of €22 million for the period, compared to a €113 million profit a year earlier. The number of passengers rose 8% to 33 million. Michael O’Leary will move to become group CEO, while a new CEO of Ryanair will be appointed later in the year.  Wizz Air flew 10% more passengers during January, while passnger volumes rose to around 2.3 million.  Impala Platinum headline earnings and headline earnings per share for the interim period are expected to increase to at least R2.1 billion or 292 cents per share. Headline lossand headline loss per share for the comparative period were R150 million and 21 cents per share,respectively. AngloGold Ashanti The basic earnings for FY18 are expected to be between $120 million and $137 million, resulting in basic earnings per share of between 29 cents and 33 cents. Basic loss and loss per share for the comparative period were $191 million and 46 cents, respectively. Hapag-Lloyd upgraded to buy at Berenberg
HeidelbergCement upgraded to buy at HSBC
Royal Mail upgraded to buy at HSBC
Morrison upgraded to neutral at Cit BHP Group PLC downgraded to underweight at JPMorgan
Electrolux cut to accumulate at Handelsbanken
KAZ Minerals downgraded to hold at HSBC
Novo Nordisk cut to accumulate at Handelsbanke 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. 

IG-Andi

IG-Andi

Dividend Adjustments 4 Feb - 11 Feb

Expected index adjustments  Please see the expected dividend adjustment figures for a number of our major indices for the week commencing 4 Feb 2019. 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 this week
  Index Bloomberg Code Effective Date Summary Dividend Amount NIFTY INFO IN 24/01/2019 Special Div. 4 TOP40 NTC SJ 23/01/109 Special Div. 40 RTY CZNC US 25/01/2019 Special Div. 0.1   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.    

MaxIG

MaxIG

US economy still leads the pack - APAC brief 4 Feb

US economy still leads the pack: The bounce in global equity markets has been uniform, but the economic data is pointing to a return of the “diverging global growth” narrative. It was what dominated the latter half of 2018: the US is humming, while the rest of the world economy languishes. The difference in economic fortunes isn’t quite so stark now, however it remains conspicuously extant. It becomes a matter of how long such a dynamic can last. Frankly, market participants had resigned themselves to the fact it was already over. But a quick review of even Friday’s economic data alone suggests the narrative still has legs. An all-encompassing global economic slowdown is likely to arrive, eventually. For now, though, the US economy has its head above the water, while rest of the world doesn’t.  Financial conditions and economic data supportive: The dovish Fed are, and will continue to be supportive of this, as financial conditions loosened once again in response to last week’s FOMC meeting. It’s no mystery to markets: the correlation between a recovery in financial conditions and the performance in equities is clear. The fears of a US recession, based purely on the macro-data, is still unfounded. The numbers coming out of the US on Friday weren’t spotless, but they were still very strong. ISM Manufacturing PMI beat economist consensus forecast, and US Non-Farm Payrolls showed an increase in jobs in the US economy of 304k. The jobs data was marred by a downgrade in previous months jobs-gain numbers, a dip in annualized wage growth, and a tick-up in the unemployment rate. Overall, however, the data showed a still strong US economy. Asian and Europe tangibly slowing: This contrasts with what came out of Europe, and really the rest of the world, during Friday’s trade. Europe is clearly heading for an economic slowdown, and it’s becoming a matter of true concern. Chinese economic data reminded traders too that the Middle Kingdom finds itself in its own strife. PMI numbers released from both geographies greatly disappointed market-bulls. The Caixin PMI release revealed a far steeper contraction than what had been estimated, while the balance of several European PMI numbers showed general weakness in the Eurozone – especially the embattled Italian economy. To be fair, European CPI numbers did beat forecasts slightly. But at 1.1 per cent annualized, it remains so far below target that the notion the ECB will hike rates before the next recession seems laughable. Financial markets neutral bias on Friday: As soft as the numbers were, they didn’t appear to faze traders a great deal. One assumes that the outlook reflected by the data was largely priced into the market. If anything, markets were pricing in a worse (collective) result to the weekend’s data. Interest rate traders lifted very negligibly their bets of rate hikes from the ECB and the US Fed – though it must be said the balance of opinion is in favour of no moves at all in 2019. Bonds sold off based on this, and emerging market assets, which had benefitted most from the dovish Fed, pulled-back to end the week. The US Dollar is in a short-term downtrend, apparently keeping gold prices elevated. The Australian Dollar kept range bound though, hovering around the mid-0.7200’s. The recovery keeps on rolling: Friday’s trade when assessed on its full merits belonged to the bulls though. Really, the entirety of last week did. It wasn’t a unanimous decision by any means; but it was enough to keep the “V-shaped” rally in equity markets intact. The extremeness of the January stock market recovery has pundits increasingly questioning what the next sell-off will look like. The “shape” of this price action is quite unusual, they are telling us. What was experienced in the last quarter of 2018 was somewhat extraordinary, so perhaps an extraordinary recovery is a necessary consequence of that. Where the market puts in its next low is a point of curiosity: Wall Street has visibly broken its downtrend, so the next low in the market builds the foundations for the next possible uptrend. ASX poised to gain this morning: The US lead will translate into a 20-point gain for the ASX200 this morning, according to the last traded price on the SPI Futures contract. Friday’s trade wasn’t quite as bullish for the ASX as it was for other parts of the global equity market. The index closed effectively flat, on a day of above average volume and relatively poor breadth. Iron ore prices, which have maintained a consistent rally since the tragic Vale dam collapse, have fed a rally in the mining stocks. The materials sector added 4 points to ASX200 on Friday and looks poised for further upside moving forward, as another shifter higher in oil prices, a weaker USD, and general market bullishness support elements of international commodity markets. The banks under scrutiny today: The challenge for the market will be trying to sustain a move higher while there remains so many concerns about the financial sector. The final report from the Hayne Royal Commission is released after-market today, and the uncertainty generated by what will be recommended in the report is keeping upside in bank stocks, and therefore the ASX200, at bay. Only time will truly tell what recommendations will come from the report – with less than 12 hours until its released, markets need not wait long for answers. Whatever is revealed, it will be assessed through the lens of how it may impact future credit conditions in the Australian economy, especially given the major slowdown in Australian property prices, and the recent slowing of consumer credit growth in the overall economy.  

Written by Kyle Rodda - IG Australia

MaxIG

MaxIG

When it rains, it pours; Amazon shares decline - EMEA Brief 01 Feb

Amazon announced a rise in investments, causing shares to fall over 5 percent , however beats earnings per share expectations and revenue, reporting $6.04 per share in comparison to an estimate of $5.68 per share and a revenue of $72.4billion versus %71.9billion. Caxin Manufacturing PMI falls below expectations to 48.3 in January in comparison to 49.7 in December, its lowest reading since 2016 Stocks in Asia mostly traded higher, with the Shanghai Composite increasing around 1.3 percent, Shenzhen component and Shenzhen Composite also rising by around 1.7 percent, the opposite to the Hang Seng Index which fell by around 0.18 percent along with the ASX 200 down 0.03 percent Stocks on the S&P 500 jumps 0.9%, totalling a rise of 7.87 percent this month, closing out their best January in three decades. Nasdaq Composite also rises 1.37 percent but the Dow Jones Industrial Average closes just below the flatline. Xi Jinping, China’s leader, reached out to Trump in a letter in hopes of accomplishing a trade agreement before the March deadline.   Deutsche Bank fails to meet profit expectations as its 2018 full-year profit totalled 341million Euros ($390million), compared to analysts estimates of 461million euros Singapore and China to build a city in China to become a home for 500,000 people by ‘converting farmlands into a sustainable urban development’ The amount of Gold purchased by central banks, in volume, reaches its highest level since 1967. It is estimated of around 651.5 metric tons were brought in 2018, 74 percent higher than 2017 Herman Cain, former presidential candidate under consideration for the FED. Cain previously served at the bank for around 7 years, before moving into the political world, running for president in 2011 Senator Bernie Sanders suggests to increase the estate tax levels of those who earn more than $3.5million, affecting an estimate of 0.2 percent of the country. The current tax levels affect those who inherit more than $11million GE shares increase to its highest in 9 years by 18%, after posting better than expected revenue of $33.3billion in its fourth quarter Asian overnight: A mixed affair overnight has seen gains in Chinese markets overshadow the more subdued downside seen throughout the likes of Japan, Hong Kong, and Australia. Much of the gains in China can be attributed to bullish comments from Donald Trump, who tweeted that China stands ready to import huge amounts of US soybeans. The problem is that China already imported a massive amount of soybeans to begin with, but at least it is a step in the right direction. Unfortunately we also saw some bad news for the Chinese, with the Caixin manufacturing PMI declining further into contraction territory with a reading of 48.3, from 49.7. UK, US and Europe: Looking ahead, the manufacturing theme looks set to continue, with eurozone (revised) and UK PMI (initial) readings for the sector released during the morning. Also keep an eye out for the eurozone CPI inflation reading, which is expected to decline into a nine-month low. Finally, the US looks set to spark significant volatility, with the release of the jobs report in the afternoon. Last month saw a huge payrolls number, and thus this month expects to see a more subdued figure. Also look out for the manufacturing PMI surveys from the US. On the corporate front, Chevron and Exxon Mobil round off a busy week for earnings. Economic calendar - key events and forecast (times in GMT) Source: Daily FX Economic Calendar 9.30am – UK mfg PMI (January): previous reading 54.2. Market to watch: GBP crosses
10am – eurozone inflation (January, flash): prices rose 1.6% in December. Market to watch: EUR crosses
1.30pm – US non-farm payrolls (January): 183K jobs expected to have been created, from 312K, while average hourly earnings rise 0.3% MoM. Markets to watch: US indices, USD crosses
3pm – US ISM mfg PMI (January): indices to fall to 54 from 54.1. Markets to watch: US indices, USD crosses Corporate News, Upgrades and Downgrades TalkTalk said that annual earnings would fall short of forecasts, due to investment spending and accounting changes. Guidance was £245-250 million, below the consensus of £259 million. RPC reported flat earnings, with operating profit for Q3 similar to a year earlier, although revenues rose 1.4% to £894 million. The firm said it would engage with Berry Global, which unveiled a competing bid for the firm yesterday. Puma attempts to compete with Nike, releasing a self-lacing shoe in 2020, where individuals can tighten or loosen the laces using an app Daimler upgraded to overweight at Morgan Stanley
H&M upgraded to reduce at Handelsbanken
Rio Tinto upgraded to add at AlphaValue
Rentokil upgraded to buy at Citi
  Adidas downgraded to neutral at UBS
Close Brothers downgraded to sell at Citi
Intertek downgraded to hold at Jefferies
Mediaset downgraded to underweight at Barclays
  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. 

KatherineIG

KatherineIG

Fed sparks bullish sentiment - APAC brief 1 Feb

Fed sparks bullish sentiment: Traders were bullish overnight, but as far global equities go, the ultimate results were mixed. Activity has been very high, that’s irrefutable. Volumes flowing into stocks have been much higher than average, no matter where you look. Fundamentally, the Fed has lit a fire under markets, and traders are repositioning to adjust to a new set of circumstances. The fundamentals have shifted in quite a meaningful way. It’s the notion that the Fed will maintain monetary policy support that has made this so. A world of relatively easy monetary policy and loose financial conditions has market participants believing the record bull-run can be sustained. It may prove fleeting, merely a boost in sentiment, but at the very least today, markets have found their justification to buy-in. Bond markets start to adjust: Look no further to rates and bond markets to see the true impact of what the Fed has done. US Treasuries had been a boring market to watch for most of January, at least when compared to the events of late 2018. The US 10 Year note had been less than a 10-basis point trading range. The ultra-dovish Fed yesterday morning put an end to that. Implied probability for a rate hike this year from the Fed has for all intents and purposes has now been erased. By the end of the year, interest rate traders see little more than a 1 per cent chance that a rate hike will occur. US Bond yields have tumbled consequently, with the US 2 Year Treasury now yielding little more than current US Federal Funds rate. The greenback smack-down: The US Dollar is losing its advocates it seems. The pro-Dollar cheer squad espoused two reasons to justify their hitherto bullishness: if the economy regains its strength, then that means higher US rates, ergo a stronger greenback; if the economy goes into decline, that means greater risk aversion, ergo a stronger greenback. That idea is very cogent and could prove true in time, but here-and-now, the price action flies in the face of Dollar bulls. The USD is well off its highs, and although receiving a lift from a weaker Euro last night, a lift in our Australian Dollar (along with other risk-currencies) to above 0.7260 suggest traders are more than happy to short the greenback where it presently trades. Global economic data shows further weakness: Which leads to the irony, or perhaps contradiction, in financial markets at-the-moment: global growth keeps showing signs of a synchronized slow down. A weaker global economy in 2019 is all but a given if you listen to the analysis of the global economic elite. Last night though, markets were delivered another dose of reality about what the “real” economy is up to. A truckload of macro-data was released yesterday, and though there were some solid numbers here-and-there, most of it was quite ugly. Canadian GDP figures showed a contraction in growth for the quarter, German Retail Sales data missed by a long way, Chicago PMI disappointed, Italy is entering a technical recession, and Chinese PMI figures remain in contraction territory. Trade-war pain hurts Europe: It didn’t help sentiment toward global growth that US President Donald Trump decided to hit Twitter to discuss the trade war overnight. He said nothing inflammatory, in fact he was quite positive about trade negotiations. However, the US President made quite clear that a trade breakthrough couldn’t be expected until he and Chinese President Xi Jinping sat down to nut out the final details. Seemingly, European markets copped the brunt of that news, and it showed up in its currency and fixed income markets. The EUR was down across the board last night, as German Bund yields collapsed to a 2-and-a-haf year low -- primarily as recession risks in the European economic bloc, and a subsequently idle ECB, forced traders to price-out the prospect of monetary policy normalization in Europe in 2019. ASX200 bucked the theme: Not that is represents much, but the to-and-fro between the optimism regarding a more dovish Fed, coupled with the grow anxiety elicited by slowed economic growth, has SPI futures pointing to a slim 5-point gain for the ASX200 this morning. Defying the theme in global markets yesterday, the ASX200 closed just shy of -0.4 per cent lower for the session, sustaining most of its losses during the after-market auction. Notably once again, the index failed to break through stubborn resistance at its 200-day EMA, selling-off that point once more during intraday trade. Upside momentum is diminishing in the market in the very short term, but perhaps in favour of the bulls, an ascending triangle pattern has emerged in the price action, maybe signalling an upside break is building within the market. The Fed, Hayne, and Iron Ore: The down day in Aussie stocks could be interpreted as a sign bearishness is gripping traders, but yesterday’s activity should be put into the context that the sell-off into yesterday close was probably symptomatic of a bit of end of month rebalancing in the market. Financial stocks are languishing too, as traders apparently stay out of the space ahead of Monday’s release of the final report from the Hayne Royal Commission. The beacon in the market has been the materials sector, owing to the recent rally in iron ore prices, following the devastating Vale disaster, which has thrown into question the safety (and therefore future productive capacity) of the mining industry in Brazil. To see a day in the green today, it may rely on mining bullishness outstripping banking-sector bearishness. Written by Kyle Rodda - IG Australia

MaxIG

MaxIG

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