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Markets defy expectations - EMEA brief 19 Sep



  • The rebound in Chinese stock markets has extended and US bond yields are steady after the market digested the trade tariff news. MSCI Asia-Pacific index up 0.95%, whilst the Japanese Nikkei rises 1.3%
  • A reclassification of the S&P 500 will see tech behemoth such as Facebook and Alphabet move from 'information tech' stocks into 'communication services' along with about a fifth of the index.
  • Oil prices are seen to consolidate after rally.
  • Cryptocurrency markets are holding steady, and with higher lows being made across the board this could signal a trend reversal for many technical traders.
  • UK inflation data is in focus today, likely to be closely watched as investors economic optimism hits a near seven year low.

Asian overnight: Asian markets continue to defy expectations, with gains throughout the region flying in the face of an intensified trade breakdown between the US and China. In a retaliation to the US decision to implement tariffs on $200bn of Chinese imports, China has now responded with further duties on $60bn of US imports. Chinese authorities have however said that they would not intervene in the currency market and have not yet removed themselves from upcoming bilateral talks on trade with the US. Despite both sides announcing new tariffs yesterday, the level of those levies are somewhat lower than expected, sparking a relief rally.

In Japan the BoJ decided to maintain a steady monetary policy, with the bank stating that they will maintain extremely low rates for an extended period of time.

UK, US and Europe: Looking ahead, the European session will focus on the UK inflation data, with CPI expected to reverse last month’s gain, with a tick lower to 2.4%. A similar move is expected with core CPI, where a shift down to 1.8% would help continue the downward spiral of 2018. CPI, which stands for Consumer Price Index, is a key measure of inflation for the UK and is used by the Bank of England in making interest rate decisions. The report tracks changes in the price of a basket of goods and services that a typical British household might purchase. An increase in the index indicates that it takes more Sterling to purchase this same set of basic consumer items

The afternoon brings building permits and housing starts from the US, while an appearance from Mario Draghi and the crude inventories means that we should have a sufficient amount of data to shift the needle.

South Africa: The Jse Allshare index is expected to post  gains this morning following its international counterparts. The rand is holding on to short term gains while commodity prices tick higher on the back of a weaker dollar. Tencent Holdings is trading 2% higher in Asia suggestive of a positive start major holding company Naspers. BHP Billiton is up 2.89% in Australia suggestive of a positive start for local resource counters. 

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

2018-09-19 08_01_27-Forex Economic Calendar.png

9.30am – UK CPI (August): CPI to rise 2.7% YoY from 2.5%, and 0.3% MoM from 0%. Core CPI to be 2.1% YoY from 1.9%. Markets to watch: GBP crosses

1.30pm – US housing starts & building permits (August): permits to fall 0.8% MoM and starts to rise 0.3%. Markets to watch: US indices, USD crosses

3.30pm – US EIA crude inventories (w/e 14 September): stockpiles forecast to fall by 1.2 million barrels, from a 5.3 million barrels drop a week earlier. Markets to watch: WTI, Brent

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Stagecoach said that it has made a good start to its financial year, with forecasts unchanged despite a mixed performance, as revenue weakened in North America but UK rail revenue rose.  
  • Kingfisher said that underlying pre-tax profit fell 14.8% to £375 million for the first half, while first-half gross margin fell 40 basis points. The firm said it remained on track to hit strategic milestones 
  • NEX will pay $50 million to settle claims in the US relating to interest rate benchmark manipulation.  

BAT upgraded to hold at DZ Bank
CNP Assurances upgraded to hold at HSBC
Commerzbank upgraded to outperform at RBC
Concentric upgraded to buy at SEB Equities

Castellum downgraded to sell at DNB Markets
Coloplast downgraded to hold at ABG
Credit Agricole cut to neutral at Mediobanca
Fabege downgraded to sell at DNB Markets

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