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Oil booms, China bust? - EMEA brief 27th June



  • Chinese markets hit with yuan slipping to 6 month low and stock market and leading index falling.
  • Oil sees significant positive price action as US pressures allies on Iranian crude oil.
  • Trump hits out at Harley Davidson motorcycles for planning a move of U.S shores on the back of trade tariffs. 'Trading the trade wars' video by IGTV and Bryan Noble is today's featured video below.
  • Gold slips as investors turn to rival safe haven assets.
  • Bitcoin and cryptocurrency consolidating at the support, however no signs or reasons for a bounce as presence.
  • Shares in Tesco and Sainsburys slide on loss of market share. 

Asian Overnight: Chinese and Hong Kong indices led Asian markets lower overnight, with a sharp drop in the Shenzhen composite and Hang Seng providing the stand out underperformers amid largely flat trade in Japan and Australia. Rising oil prices provided a boost to energy stocks, with the US putting pressure on other countries to end the purchase of Iranian crude. In particular, this rise in crude prices helped shift the Australian ASX 200 out of the red, with the energy sector rising 1.3%.

UK, US and Europe: Looking ahead, the European session looks likely to focus on the Bank of England once again, coming off the back of last week’s rate decision. An appearance from Carney accompanies the latest BoE financial stability report. The US session will look towards core durable goods orders for their lead, with the latest trade balance data also taking on an important role given recent disagreements over trade. The crude market is also back in focus, with the latest US inventories due out later in the day. NZD traders should also be aware of the latest RBNZ rate decision tonight.

When it comes to the Trump trade war tariffs JPMorgan economist David Hensley has stated that they "remain of the view that a large scale "trade war" remains a low probability though the odds of it happening appear to have increased"US Futures and Asian equity markets are trading lower this morning while the dollar and US treasury yields trade firmer. The trade war rhetoric generally continues, although US President Donald Trump looks to have softened his stance slightly saying that he may look to a less confrontational approach with China.

South Africa: Precious and base metals trade mostly lower this morning while the rand is slightly softer against the majors. Oil prices have gained post the OPEC decision to raise output as well as supply disruptions in Canada. Tencent Holdings is trading 1.2% lower on the Hang Seng suggestive of a softer start for major holding company Naspers. BHP Billiton is up 1.8% in Australia suggestive of a positive start for the local listing thereof. 

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


1.30pm – US durable goods orders (May): expected to rise 0.2% from -1.7% MoM, while excluding transportation orders forecast to rise 0.5% from 0.9%. Markets to watch: US indices, USD crosses

3pm – US pending home sales (May): forecast to rise 0.1% from -1.3% MoM. Market to watch: USD crosses

3.30pm – US EIA crude inventories (w/e 22 June): stockpiles expected to fall by 5.1 million barrels after falling 5.9 million barrels a week earlier. Markets to watch: Brent, WTI

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Inmarsat drops over 12% as Eutelsat, the company who were poised for a take over bid, back out just hours after their initial interest as reported in the IG Community EMEA morning briefing yesterday. 

  • Whitbread reported a 3.2% rise in Q1 sales, thanks to new hotel capacity and additional Costa stores. However, sales were down 1.3% in the UK on a like-for-like basis. Progress continues on the Costa de-merger, with progress on core infrastructure and efficiency work.  

  • Ultra Electronics downgraded its first-half profit guidance due to cost overruns at its US defence unit. Expectations for full-year operating profit has been cut by £4-6 million. 

  • Bunzl said that it expected revenue for the first half to be 11% higher at constant exchange rates, while spending on acquisitions so far this year has been £105 million. 

  • Global Credit Ratings (“GCR”) has affirmed the national scale ratings of A-(ZA) and A1-(ZA) to Transaction Capital Limited (SA) in the long term and short term respectively, with the outlook accorded as Stable.

  • Deutsche Bank maintains buy rating on Vodacom (SA) but reduces target to 15000c

Adecco upgraded to outperform at RBC
Sainsbury upgraded to overweight at Barclays
Carnival Plc upgraded to buy at Berenberg
Petrofac upgraded to buy at Kepler Cheuvreux

BMW downgraded to reduce at AlphaValue
Gima TT downgraded to hold at Kepler Cheuvreux
Rubis downgraded to hold at Berenberg
ICG Enterprise Trust downgraded to hold at Jefferies

Featured video

Please note: This information has been prpared 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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