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Japan and China to repair ties- EMEA Brief 26 Oct

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  • Japan and China sign a bilateral currency swap to improve financial stability
  • Asia predicted to be more vulnerable than the US in regards to the sell-off in global stock markets, according to managing director of FX strategy for BK Asset Management
  • US Futures direct more than a 200-point drop for Dow Jones, after seeing a slight recovery on Thursday
  • Amazon shares drop nearly 9% in after-hours trading, regardless of hitting record profits of nearly $2.9billion in the last quarter in comparison to $256million last year, and sales increasing 29% in the third-quarter to $56.6billion. Revenue for its cloud services business also rises by 46% year-on-year and its advertising business by 122%.
  • Alphabet shares fall 3.9% in after-hours trading as third-quarter sales doesn’t reach expectations
  • Cryptocurrencies remaining stable regardless of global stock market sell-off, with Bitcoin, XRP and Ethereum falling 0.23%, 2.09% and 1.38% in comparison to 4% for Bitcoin and more than 11% for XRP and Ethereum on October 11th
  • UBS’s net profit 32% higher than expected as it increases in third quarter to 1.2billion Swiss Francs
  • As predicted, Turkey’s Central Bank left its benchmark interest rate unchanged, causing the Turkish Lira to initially weaken to 5.71 against the Dollar
  • Net-long positions for EUR/USD reach its second month high, at an estimate of 61.3%

Asian overnight: Asian markets are back in the red today, with the Australian ASX 200 providing the only market that kept its head above water. The Chinese Yuan hit the lowest level since the financial crisis overnight, with US-China trade dispute showing no signs of improvement. Data-wise, the Tokyo core CPI figure came in steady at 1%.

Japanese Prime Minister met Chinese President in Beijing, signing a bilateral currency swap arrangement, effective until 25th October 2021. According to the Bank of Japan, this agreement will allow the exchange of local currencies of up to 200billion Yuan/3.4trillion Yen between the two central banks.

UK, US and Europe: A somewhat quiet economic calendar sees markets focus in on the US GDP reading as the one top tier piece of data worth keeping an eye out for. Market predictions point towards a sharp fall to 2.6% from 4.2% last quarter. Elsewhere, keep an eye out for the latest earnings from Exxon Mobil.

US stocks recover on Thursday from its previous lows, with the Dow Jones Industrial Average rising 400 points, S&P 500 gaining nearly 2% and the Nasdaq increasing by 3.2%, in comparison to a fall on Wednesday of 608.01 points, 3.1 and 4.4% retrospectively. However, US stocks decline after Thursday’s close with the Dow Jones and S&P 500 dropping at 5.6% and 7.2% for October, and the Nasdaq falling 9.1%.

The on-going concerns of longer border checks at Calais continue as the Brexit Secretary, Dominic Raab, warns The House of Commons of a worst-case scenario, which could lead to the French authorities potentially introducing a “go-slow” policy, if the UK leaves without a deal. Raab suggested to MPs to “prepare for the worst case scenario where the authorities at Calais are deliberately directing a go-slow approach by supporting a diversion of the flow to more amenable ports in other countries”.

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

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Source: Daily FX Economic Calendar

1.30pm – US GDP (Q3, preliminary): growth to be 2.6% QoQ from 4.2%. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • RBS reported an operating profit before tax of £961 million for Q3 2018, up from £871 million in Q3 2017. The bank is reducing its costs through transformation and digitisation, with expenses for the year falling 3.3% compared with 2017. In preparation for Brexit, the bank has gained approval from the Dutch regulators for a banking license.  
  • IAG posted an operating profit of €1,460 million in the nine months to September 30, 2018, up from €1,450 million last year. Rising fuel price and foreign exchange factors provided headwinds for the firm over the period, yet the firm still proposed an interim dividend of 14.5 euro cents per share.
  • Glencore saw improved Copper, Cobalt, Nickel and coal production in the third quarter, with zinc the one disappointing segment of the business. Own sourced copper production was 12% higher than the comparable 2017 period, while cobalt production was up 44%after the firm restarted Katanga's processing operations. Nickel production was 13% higher, reflecting the progressive ramp-up of Koniambo, with its second production line. However, Zinc output fell 5% after African assets were sold to Trevali Mining. Adjusting for that disposal, zinc production was up 7%. 
  • Tesla Model 3 to come to the UK and Australia by mid-2019, according to the CEO
  • Nokia to cut thousands of jobs as part of a cost reduction program, after third-quarter profit falls 27% to 487million Euros, in comparison to the previous year at 668million Euros
  • Volvo buys a stake in FreeWire Technoligies
  • Debenhams to close around 50 stores as it hits a record low of a £491.5 loss due to charges on leases and goodwill, the biggest fall in its 240-year history.
  • BT Group CEO Gavin Patterson to be replaced by Philip Jansen from February 1st
  • British Airways face second hack attack which may affect over 185,000 individuals in relation to payment card details being stolen
  • CEO of Google admits the company had sexual harassment issues, causing 48 employees to be fired

Burberry upgraded to hold at HSBC
Kion upgraded to overweight at JPMorgan
Lloyds upgraded to neutral at Macquarie
LVMH upgraded to buy at HSBC

 

AB InBev downgraded to hold at Independent Research
Covestro downgraded to hold at Berenberg
Hexpol downgraded to hold at SEB Equities
Valeo downgraded to inline at Evercore

 

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1 hour ago, Guest phil said:

why does amazon drop so much on so much good news?

Good question. Markets - 90% emotions 10% facts. People are deciding their money is safer in US dollars.

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There’s a deal of subjectivity to it as well isn’t there. I think with Amazon it’s the disappointing outlook rather than the past figures 

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