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Tariffs spook markets - EMEA brief 11th July



  • The Trump house looks to impose 10% tariffs on $200 bln of Chinese goods.
  • Shanghai and Hong Kong equity markets drag down the wider overnight Asian session.
  • The bidding war on Sky continues with Murdoch's Fox offering £14/share beating Comcasts previous £12.50.
  • Copper and zinc slide to 1-year low, oil also sharply lower on trade war fears.

Asian overnight: Asian markets were back in the red overnight, as Donald Trump has once again ramped up trade war fears, driving away any optimism built in recent days. With Trump starting the process that will ultimately lead to the imposition of tariffs on $200 billion worth of Chinese goods, there is reason to believe we are entering the next stage of the trade war between the two countries. Unsurprisingly we have seen losses across the board overnight, with the heaviest falls centred upon the Chinese and Hong Kong markets. US and European futures are trading lower this morning as well.

UK, US and Europe: Looking ahead, central banks are in focus, with appearances from ECB and BoE governors Mario Draghi and Mark Carney. The big event of the day comes in the form of the Bank of Canada rate decision, where the committee is expected to push interest rates higher for the first time in 2018. Also keep an eye out for US PPI, and crude oil inventories data.

South Africa: We are expecting a softer open on the local SA index as the trade war narrative see's escalation once again. We have seen some strength returning to the dollar and in turn mostly weaker commodity prices and a softer rand. Tencent is trading 2.3% lower in Asia this morning, suggestive of a similar start for major holding company Naspers. BHP Billiton is trading 1.3% lower in Australia, suggestive of an initial decline for local resource counters. A softer rand is expected to continue to weigh on financial counters as well as local retail counters. 

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


1.30pm – US PPI (June): forecast to be 0.1% from 0.5% MoM, while core PPI falls to 0.2% from 0.3%. Market to watch: USD crosses

3pm – Bank of Canada rate decision: rates expected to remain at 1.25%. Market to watch: CAD crosses

3.30pm – US EIA crude inventories (w/e 6 July): stockpiles expected to fall by 230,000 barrels from a 1.5 million barrel drop a week earlier. Markets to watch: Brent, WTI

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Sky has agreed new terms for its takeover by 21st Century Fox, with the US firm offering £14 per share, up from the previous £10.75 per share.  

  • Burberry reported a 3% rise in like-for-like sales for Q1, and there was no change to full year guidance. 

  • Indivior said that guidance for its financial year was ‘no longer valid’, as a rival generic product in the US has a major impact on operations. The revenue impact could be $25 million for 2018. 

  • Barratt Developments expects record profit for the year, bolstered by Help to Buy. Pre-tax profits are expected to be £835 million, from £765.1 million a year ago. The firm completed 17,579 homes, compared to 17,395 last year, while the number of plots sold was up 4%. 

Coca-Cola HBC upgraded to buy at Jefferies
Drax upgraded to outperform at Macquarie
LPKF upgraded to buy at HSBC
HSBC upgraded to overweight at JPMorgan

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

BHP downgraded to hold at Renaissance Capital
CYBG downgraded to underperform at KBW
Trelleborg downgraded to hold at SEB Equities
Virgin Money downgraded to market perform at KBW

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I've just spoken to our TV team and we are scheduling in a flow piece with Blackrock for Monday (we'll call today to confirm). Keep an eye out and I'll try and remember to post to Community. 

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oil no longer in that pull back after the biggest draw since 2016 apparently! But there have been bigger pull backs immediately and we're actually lower than we were at the start...


Edited by 247trader
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