Jump to content

RIO buyback and industrial metal rally - EMEA brief 20 Sep



  • Stocks pull back in the Asian overnight market after a tepid close of Wall Street last night.
  • Bellwether metals copper and zinc, along with other industrial metals, continue their rally as investors and traders focus on increasing demand rather than US-Sino relations.
  • Rio Tinto announced a $3.2bn share buyback scheme, and whilst the Anglo-Australian miner saw 3.2% gain the ASX didn’t follow suit and ended down slightly. Potential swings on the UK Rio listing on the open.
  • In EM currencies, the SA Rand rallied on Wednesday after consumer price growth slowed according to inflation data. This comes ahead of the rate decision today - one to keep an eye on amid potential volatility.
  • A solid reading on New Zealand’s economic growth GDP figure pushed the NZ dollar higher.
  • US dollar index was down around 0.1%, with the euro trading at around 1.168 USD whilst 10 year treasuries are up around 10 basis points in the last week.
  • US crude inventories saw a three and a half year low yesterday whilst gasoline saw a pullback. Both energies were up on the news and have seen consolidation since. This could be one to watch today for any profit taking or movement on the back of trade talk news.
  • The president of the Financial Action Task Force, the global anti money laundering body, has said he’s optimistic about agreeing a set of standards for AML procedures applied to crypto and virtual currencies.
  • Retail Sales in the UK, US initial jobless claims, and the EU press conference are the macro data areas to look out for today.

IGTV Previous Live Shows - IG Community.png

Asian overnight: A much less decisive and convincing session overnight has seen Asian markets largely exhibiting moderate gains in a day that has seen them oscillate around the market open level. The one loser on the session came from Australia, with the ASX 200 falling after a report from the RBA said that in an all-out trade war, the AUD could significantly strengthen. The NZD was one of the strongest currencies of the session, following an improved GDP number of 1% for Q2.

UK, US and Europe: Theresa May stated yesterday that she will not accept Brexit offers that treat Northern Ireland as a separate customs territory, after the EU proposed to keep the region within its customs union and single market. Further to the Financial Action Task Force statement on cryptocurrencies discussed above, the UK's Treasury Committee has announced that the country could soon implement regulatory reforms for Cryptocurrencies, to address poor security, extreme volatility and excessive anonymity. The proposed aim is to make the UK a legitimate home for crypto trading and become a major trading centre.

Looking ahead, the UK is back in focus with the release of the latest retail sales number. Volatility over Brexit has been influencing the pound and thus traders should also watch out for any further comments from the UK or EU. In the afternoon, keep an eye out for the US Philly Fed manufacturing index and existing home sales. Meanwhile, the eurozone comes back into play, with consumer confidence and an appearance from Bundesbank President Weidmann later in the day.

South Africa: Global markets are giving ambiguous signals today for the JSE as US Index futures and Asian markets show a mix off marginal gains and losses this morning. There is little in the way of new news to guide markets today although South African traders and speculators will keep a watchful eye on the Reserve banks monetary policy meeting this afternoon.

Lending rates are expected to remain unchanged, although there remains a possibility of a marginal rate hike. The rand remains firm leading into the news event. Tencent Holdings is up 0.25% in Asia suggestive of a marginally positive start for major holding company Naspers. BHP Billiton is trading 1.14% higher in Australia, suggestive of a positive start for local resource counters.  

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

2018-09-20 07_50_46-Forex Economic Calendar.png

Source: Daily FX Economic Calendar

9.30am – UK retail sales (August): sales to rise 0.2% MoM and 2.7% YoY, from 0.7% and 3.5% respectively. Markets to watch: GBP crosses

1.30pm – US initial jobless claims (w/e 15 September), Philadelphia Fed index: claims to rise to 208K from 204K, while the Philly Fed index rises to 15 from 11.9. Markets to watch: US indices, USD crosses

3pm – eurozone consumer confidence (September): confidence index to rise to -0.7 from -1.9. Markets to watch: EUR crosses

3pm – US existing home sales (August): forecast to rise 0.6% MoM from a -0.7% fall. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • Rio Tinto has announced details of its $3.2 billion share buyback, combining an off-market tender of $1.9 billion and additional on-market purchases. 
  • Stobart said that passenger numbers at its London Southend airport rose 37% for the first half.  
  • Kier Group reported a 9% rise in underlying pre-tax profit for the full year, to £137 million.  
  • Diageo said that the new financial year had begun well and that performance remained in line with expectations. Heightened exchange rate volatility is expected to hit operating profit for the year by around £45 million.  

Aveva upgraded to overweight at Barclays
Weir upgraded to overweight at Morgan Stanley
Bayer upgraded to buy at Citi
Proximus upgraded to buy at Citi

Essity downgraded to neutral at Goldman
Nokian Renkaat downgraded to sell at Carnegie
Telenet downgraded to neutral at Citi
Telefonica Deutschland downgraded to sell at Bankhaus Lampe

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


Recommended Comments

There are no comments to display.

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • Create New...