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Roundtable discussions - EMEA brief 20th June

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JamesIG

  • Asian market bounced a little on Wednesday morning on continued trade war talks. In the Chinese markets regulators sought to calm the markets.
  • Those with large Chinese export books such as Boeing and machinery manufacturers Caterpillar were hit the hardest with Trump's threat of further tariffs. These may be ones to watch going forward as the trade war unfolds.
  • The ‘big four’ accounting scandal continues with internal report from a Lloyd’s bank employee detailing allegations of misconduct by senior bank staff and KPMG auditors.
  • A drop in US crude inventories and the loss of storage capacity in Libya provided some recovery to oil prices.
  • Bitcoin down around 2am BST after a South Korean exchange was hacked, however we have broadly seen consolidation around these levels for the last 10 daily candles.
  • Think tanks in the UK call on legalisation of cannabis for medical use after high profile case of a young boy who was hospitalised after his cannabis oil, used to aid severe epilepsy, was confiscated. You can see the best marijuana stocks to watch on IG.com

Asian Overnight: A largely bullish session overnight saw gains for a number of markets, despite the continued concern over a potential trade war between the US and China. The reasons for this mornings gains are as yet unclear, although there is some suggestion of easing trade war tensions as being the catalyst (we are however not yet convinced of this). This breather in the recent global stock market decline has provided welcome respite, yet issues remain. Oil prices also moved higher, with the OPEC meeting looking increasingly likely to provide volatility, with Iran expected to refuse any production increase, as proposed by Saudi Arabia. 

UK, US and Europe: Looking ahead, a roundtable discussion including governors from the RBA, BoE, BoJ, and Fed will be a significant event which will certainly be watched closely for signs of any clues as to future monetary policy changes. Also keep an eye out for the latest existing home sales and crude inventory figures.

South Africa: Global markets are finding some short term reprieve as US Futures and Asian markets rebound this morning.  The rand has clawed back some strength after the severe weakening we saw yesterday, which could help a partial rebound in local financial counters this morning. BHP Billiton has added 0.75% in Australia this morning, suggestive of a positive start for local retailers. Tencent Holdings has added 1.3% on the Hang Seng suggestive of a similar gains for locally listed Naspers. 

Economic calendar - key events and forecast (times in BST)

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2.30pm – ECB Central Bank Forum, Portugal: the ECB will host central bankers from around the globe, with speeches from RBA governor Lowe, ECB president Draghi, BoJ governor Kuroda and Fed chair Powell. Markets to watch: AUD/USD, EUR/USD, USD/JPY, US Dollar Index

3pm – US existing home sales (May): forecast to rise 1.5% MoM from a 2.5% drop. Market to watch: USD crosses

3.30pm – US EIA crude inventories (w/e 15 June): expected to rise by 690,000 barrels from a 4.14 million barrel drop a week earlier. Markets to watch: Brent, WTI

Source: Daily FX Economic Calendar

Featured video: BCC predicts worst UK growth since 2009

Corporate News, Upgrades and Downgrades

  • Sports Direct has sold its interest in US retailer Finish Line. 
  • Sirius Minerals has signed an agreement to sell its fertiliser product to African firm Intercontinental Trade DMCC Dubai. The agreement will last for seven years. 
  • Berkeley Group has raised profit guidance for the two years to 30 April 2019, by £75 million to £1.575 billion. Pre-tax profit for its full-year was up 15.1% to £934.9 million, Revenue was £2.7 billion from £2.72 billion a year earlier. 
  • Tesla has seen volatility the first half of the week as Musk accuses employees of hacks and code changes to production line software under false usernames and unauthorised data exports to third parties.
  • Disney and 21st Century Fox pledge increases to sky and sky news funding, with the later being divested to Disney, to help push through the Fox/Sky merger.
  • Footasylum down over 50% after profit warnings and slashed 2019 growth forecast by Analysts. Full year results show profit before tax down to £1.9m from £8.1m last year due to cost on the back of the companies inclusion in the AIM market.
  • Grindrod (SA) Shareholders are advised that total earnings per share for the six months ending 30 June 2018 is
    expected to be positive (an increase of more than 100%). The prior year comparative period, being
    the six months that ended 30 June 2017, reflected a loss per share of 11.5 cents

Sandvik Upgraded to Buy at Goldman
JP Morgan maintain overweight rating on Naspers (SA) with a target price of 450000c

SSE Downgraded to Sector Perform at RBC
Ringmetall Downgraded to Hold at Montega
SKF Downgraded to Sell at Goldman

Please note: 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.

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