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EU summit discussion - EMEA brief 28th June

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JamesIG

Asian overnight: A mixed session in overnight markets came after the White House pulled plans to restrict Chinese acquisition of US technology, helping ease trade war fears that continue to dominate market sentiment. Interestingly, we still saw Chinese stocks fall, with the Shenzhen and Shanghai composite indices trading within the red. Once again, we saw the Australian ASX 200 gain ground amid a resurgence for crude prices. The Yen was largely flat over the session, with a weak retail sales reading (0.6% from 1.5%) offset by demand for the haven currency. Meanwhile, the RBNZ decided to keep rates unchanged as expected, with no shift in rates expected for some time yet.

UK, US and Europe: The focus for the European session will be the latest EU summit, where Brexit is likely to remain one of the key topics of discussion, alongside immigration issues which are a thorn in the side of Angela Merkel. The US session sees the final US GDP reading released alongside unemployment claims. However, for the most part markets are likely to instead look to Donald Trump and China for a lead on market bias.

South Africa: We are seeing a firming US dollar and US Treasury Yields trading while emerging market currencies and commodities (excluding oil) under pressure once again. In turn we are expecting a lower open on the Jse Top 40 Index this morning. Tencent HOldings is 0.3% lower on the Hang Seng, suggestive of a softer start for major holding company Naspers. BHP Billiton on the other hand has extended short term gains which is expectant of a positive start for its local listing in South Africa. 

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

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Source: Daily FX Economic Calendar

10am – eurozone business confidence (June): forecast to fall to 1.2 from 1.5. Market to watch: EUR crosses
1pm – German CPI (June, preliminary): expected to fall to 1.9% from 2.2% YoY. Market to watch: EUR crosses
1.30pm – US GDP (Q1, final), initial jobless claims (w/e 23 June): growth expected to be 1.2% YoY and 0.1% QoQ. Jobless claims to rise to 219K from 218K. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • JD Sports said that it continued to be confident about the outlook for the current financial year. Further expansion, with emphasis on new international stores, suggest the group is on track to meet full-year expectations.  

  • Greene King reported an 11.2% fall in adjusted pre-tax profit for the full year, to £243 million, in line with forecasts.  

  • BP is to acquire Chargemaster, the UK’s largest charging network for electric cars. It operates more than 6,500 charging points across the UK.  

  • Tullow Oil said that it continued to perform well in 2018, with first-half production averaging 87,400 barrels per day, in line with forecasts. 

  • Wilson Bayly Holme - Ovcon Ltd has said that Lower activity levels persist within local (Africa) building markets, particularly in Gauteng. Performance from the Byrne Group in London was in line with expectations over the second six months.Construction and materials saw strong competition and aggressive pricing persisted during the second half of the year which combined with an increase in non-payment by contractors due to the challenging environment.

BP upgraded to buy at Kepler Cheuvreux
Infineon upgraded to buy at DZ Bank
KAZ Minerals upgraded to outperform at BMO
OMV upgraded to hold at Kepler Cheuvreux

Suez downgraded to hold at Berenberg
Summit Therapeutics cut to hold at Panmure Gordon & Co

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