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EU joins trade war - EMEA brief 21st June



  • Trade war continues with EU initiating retaliatory tariffs from tomorrow. 25% will be levied against products from whiskey to jeans and motorbikes.
  • GBPUSD hits 7 month low on fears May will be ousted as PM over Brexit.
  • FTSE index buoyed by a depreciated Sterling. 
  • Disney ups the bid to eclipse Comcast’s $35 a share cash offer for Fox with a $71bn deal, about $38 a share.
  • Trump crumbles to international pressure and signs an executive order stopping the separation of immigrant children from their families.
  • Goldman Sachs looks to expand bitcoin involvement according to COO in a Bloomberg interview.

Asian Overnight: Another mixed session in Asia saw Chinese stocks steady themselves after yesterday’s losses despite continued fears over a trade war with the US. Crude remains at the forefront of the market agenda, with weekly US crude inventories falling by the highest amount since January. Meanwhile, a weaker New Zealand GDP figure sent NZDUSD lower overnight.

UK, US and Europe: Looking ahead, the BoE rate decision is certainly the main event of the morning session, while the SNB monetary policy announcement will also grab some headlines. Look out for FTSE / Sterling correlation. The weaker the Queens pound, the higher the overseas earnings are for companies when they convert back into pounds. The BoE announcement is likely to cause some GBP volatility so make the appropriate risk management alterations to combat this. US Philly Fed manufacturing index, and unemployment claims round off the day in the US.

South Africa: The US Dollar has strengthened to weigh on commodity prices, in particular that of precious metals. The rand has resumed weakness as a result and we expect financial counters to bear the brunt of initial weakness. BHP Billiton is trading 0.5% higher in Australia which combined with a softer rand could help local diversified resources find a bid this morning. Tencent Holdings is down 2.5% on the Hang Seng, suggestive of a soft start for major holding company Naspers. 

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


12pm – BoE interest rate decision: no change in rates expected, but watch for any changes in the voting pattern from the last vote which was 7/9 in favour of leaving rates unchanged. Market to watch: GBP crosses

1.30pm – US Philadelphia Index (June), initial jobless claims (w/e 16 June): Philly Fed index expected to fall to 28 from 34.4, initial jobless claims expected to rise to 223K from 218K. Markets to watch: US indices, USD crosses

9.30pm – Fed publishes bank stress test results: the US central bank will issue the results of these tests, so bank and other financial stocks will be in focus. Market to watch: US bank stocks

Source: Daily FX Economic Calendar

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Corporate News, Upgrades and Downgrades

  • Dixons Carphone said that pre-tax profit for the full year was down 23.6%, to £382 million, while like-for-like revenue rose 4%. Slower growth in the UK and Ireland was blamed for the weaker performance. 
  • Saga traded in line with forecasts in the four months to 31 May 2018. Saga-branded retail insurance policies were up 1% year-on-year. 
  • Lloyd’s Banking Group announce hundreds of job cuts yesterday citing a change in customer behaviour.
  • Tesla files lawsuit against Martin Tripp, the former employee who allegedly orchestrated a hack and data breach of Tesla operating software.

Essity upgraded to overweight at Morgan Stanley
Nornickel GDRs upgraded to buy at Citi
Peab upgraded to hold at DNB Markets
Rio Tinto upgraded to buy at HSBC

Euronext downgraded to equal-weight at Barclays
Hypoport downgraded to neutral at Oddo BHF
Veolia downgraded to hold at Jefferies
Virgin Money cut to neutral at JPMorgan

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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IGTV now broadcasting live over the BoE announcement. 

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