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Brexit breakdown? - EMEA brief 10th July



  • A lack of trade war news is jumped on by Asian equity markets which rally for a third consecutive session.
  • Boris Johnson follows David Davis and resigns from his position of Foreign Secretary sparking speculation of a rebellion.
  • Oil dropped yesterday after Merkel and Li commit to Iran nuclear deal, before supply shortages and strikes in of oil workers in Norway aided the reversal for brent and WTI to finish up.
  • Gold prices inch up amid the continued Brexit uncertainty, whilst subdued dollar assists commodities. 

Asian overnight: Asian markets failed to sustain their overwhelmingly positive start to the week, with the overnight session seeing gains in Japanese and Hong Kong markets counteracted by weakness in China and Australia. Energy stocks were in focus amid a rise in crude prices, while the pound recovered much of the losses seen in the wake of yesterday’s political rollercoaster ride. On the data front, Chinese inflation data moved higher as expected, with CPI rising from 1.8% to 1.9%, while PPI jumped from 4.1% to 4.7%.

UK, US and Europe: Despite two years of hashing out a brexit plan and continued discussions with the EU, and a confirmation by May that she had secured an agreement on Britains biggest foreign and trading policy in nearly 50 years, two UK MP's quit citing a change of heart in something the cabinet had agreed on last week.  Looking ahead, the UK remains in focus, with the first monthly GDP reading from the ONS set to be released. This comes amid the release of goods trade balance data, industrial, and manufacturing production figures, ensuring the pound remains in focus. Finally, watch out for the ZEW economic survey from Germany, with eurozone sentiment in the spotlight.

South Africa: Global markets are trading mixed this morning as US Futures continue overnight gains in US equity markets, while the Shanghai Composite and Australia All Ordinaries Indices trade lower today. While the trade war narrative remains in markets investor focus will now find a further catalyst in the US earnings season which commences this week. Precious metal prices are trading relatively unchanged this morning, although base metal prices looked to have commenced with a rebound. The rand has firmed, particularly against a weakening pound following yesterday's resignation of UK ministers. Tencent Holdings is trading 2.3% lower in Asia, suggestive of a similar start today for major holding company Naspers. BHP Billiton is trading 1.09% higher this morning in Australia, suggestive of a positive start for local diversified miners. 

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


9.30am – UK trade balance (May): deficit forecast to narrow to £1.2 billion from £5.3 billion. Market to watch: GBP crosses

10am – German ZEW economic sentiment (July): forecast to rise to -14 from -16.1. Market to watch: EUR crosses

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Ocado has seen a first half loss of £9 million, compared to a £7.7 million profit a year ago. Revenue was up 12.1% to £800 million. 

  • Kier said that it expected underlying profit to be in line with forecasts, and while poor weather has hit activity, volumes have returned to levels in line with expectations. 

  • TP ICAP has downgraded earnings forecasts for the year, due to rising costs and lower-than-forecast benefits from the recent merger. Finance costs will rise, as will staff compensation. 

  • Tsogo Sun Holdings - Further to the cautionary announcements issued by Tsogo, the last of which was issued on  SENS on 31 May 2018, the board of directors of Tsogo  is pleased to announce that Akani Egoli Proprietary Limited, Silverstar Casino Proprietary Limited, Tsogo Sun Casinos Proprietary Limited, Tsogo Sun KwaZulu Natal Proprietary Limited and Tsogo Sun Newcastle Proprietary Limited, all  of which are wholly-owned subsidiaries of Tsogo and Tsogo, Listed Investments Proprietary Limited and Cassava Investments Proprietary Limited, have entered into a sale of shares and subscription agreement with Hospitality Property Fund Limited and its wholly-owned  subsidiary Merway Fifth Investments Proprietary Limited for the disposal by the  sellers to Hospitality of a portfolio of seven mixed-use casino precinct properties  for an aggregate purchase consideration of R23 billion.

Acacia Mining upgraded to overweight at Barclays
Ascential upgraded to add at Peel Hunt
Chemring Group raised to overweight at Barclays

UBS upgrade Barclays Africa from sell to neutral with a target price of 19700c

Computacenter cut to underweight at Barclays
Straumann cut to market perform at Bernstein
Temenos cut to underweight at Barclays

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