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USD soft going into FOMC - EMEA brief 5th July



  • Asian markets fall for the fourth day and major currencies are generally trading in a tight range. 
  • MSCI Asia-Pacific index down 0.5% whilst Japan's Nikkei (the Japan 225) loses 1%.
  • USD slightly softer going into US Initial Jobless Claims and FOMC minutes later today.
  • Gold is holding steady before Fed minutes, whilst copper and zine are stuck near their one year lows on trade woes.
  • Oil prices fall as Trump slams OPEC on twitter and blames the cartel for rising gas prices. This issue has been raised a number of times over the last few weeks as it could cause a major issue for the 'Trumphouse' going into the November midterms. Meanwhile China's duty on U.S. crude looms.
  • Goldman Sachs are still bullish on Commodities as a whole and believe trade war fears have been overdone. "All of these concerns have been oversold. Even soybeans, the most exposed of all assets to trade wars, is now a buy."
  • Clarification by the FCA on PPI compensation could means UK banks may have to add to the £45bn they’ve already set aside for claims.
  • FMOC later today.

Asian overnight: Asian markets traded lower once more, as market sentiment continues to suffer in anticipation of the impending Sino-US tariffs on $34 billion worth of goods. Yesterday’s tweet from Donald Trump calling for lower oil prices has had a knock on effect to the equity markets and tempered some of the gains seen through the week thus far.

UK, US and Europe: Looking ahead, the focus shifts from the UK to the US, with yesterday’s Independence Day meaning we will see markets on the other side of the Atlantic play catch up with Europe. Appearances from BoE governor Carney and ECB member Mersch will be the highlights for Europe, with markets more focused on the plethora of data points out of the US. ADP payrolls data, composite, manufacturing and services PMI figures in the afternoon pave the way for the latest FOMC minutes. Keep an eye out for the dollar for the impact of the days economic releases, while stock markets will be closely followed for how much they will follow yesterday’s lead in Europe.

South Africa: After yesterdays public holiday, US futures are trading flat this morning while Asian markets continue to find short term pressure lending itself to a flat to lower start on our local bourse this morning. The dollar is trading relatively flat while commodity prices, which have a relatively large impact on the local SA index, trade mostly lower ahead of the US implementation of trade tariffs on China. BHP Billiton is trading 0.54% lower in Australia furthering the notion that we will see a softer start on locally listed resource counters today. Tencent Holdings is trading 0.5% lower on the Hang Seng, suggestive of a similar start for major holding company Naspers this morning. 

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


1.15pm – US ADP employment report (June): expected to rise to 180K from 175K. Markets to watch: US indices, USD crosses

1.30pm – US initial jobless claims (w/e 30 June): forecast to be 221K from 227K. Markets to watch: US indices, USD crosses

3pm – US ISM non-manufacturing PMI (June): forecast to fall to 58.2 from 58.6. Markets to watch: US indices, USD crosses

4pm – US EIA crude inventories (w/e 29 June): expected to see stockpiles fall by 1.6 million barrels. Markets to watch: Brent, WTI

7pm – FOMC minutes: these will provide further insight into the Fed’s decision to raise rates, as well as the shift on the committee that resulted in the dot-plot suggesting four rate hikes in 2018, from the previous three. Markets to watch: US indices, USD crosses

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • China’s ZTE has received a 30 day trade ban relief from Trump. The US provide a third of the components needed by the smartphone manufacturer who have seen a 60% decline in share price wiping off $11bn from the company valuation since the trade war talks.

  • Anglo American sees volatility spikes on take over rumours.

  • Anglo American Platinum Limited (SA) has accepted an offer from Royal Bafokeng Platinum Limited ("RBPlat") to purchase its 33% interest in the Bafokeng Rasimone Platinum Mine joint venture (“BRPM JV") for a total purchase consideration of R1.863 billion.

  • Associated British Foods said its full-year outlook was unchanged, as improvement at Primark is cancelled out by weakness in its sugar division. Group revenue for the 40 weeks to 23 June was up 3% overall, and 2% at actual exchange rates. Primark sales were up 6% on last year, but AB Sugar revenue was 17% lower. 

  • Purplebricks suffered an adjusted operating loss of £21.3 million, despite strong growth in the UK and Australia. This compares to a £5.1 million loss in 2017. 

  • Glencore has announced a $1 billion share buyback, which will run from today until the end of the year. 

  • EasyJet carried 7.9 million passengers in June, up 2.3% from a year ago, while the load factor rose to 95.4% from 94.8%. 

Aegon upgraded to buy at HSBC
Bauer upgraded to buy at Kepler Cheuvreux
Tullow upgraded to overweight at Barclays
Daimler upgraded to buy at Bankhaus Lampe

Hapag-Lloyd downgraded to neutral at Citi
Kappahl downgraded to reduce at Kepler Cheuvreux
Munich Re downgraded to neutral at JPMorgan
Soco downgraded to underperform at RBC

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