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Brent drops 6.9% - EMEA brief 13th July

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JamesIG

  • Asian session solid on reduced trade war fears.
  • UK equity markets follow suit, along with a strong bidding war emerging for Sky, giving a green day for the FTSE yesterday and a positive start to the day today. 
  • However data from China today showing a record trade surplus risks further inflaming trade tensions. 
  • Trump is visiting the UK and has said that PM May is executing Brexit incorrectly.
  • Trump's comments suggest May's Brexit plan is likely to kill hopes of a US trade deal.
  • Brent crude sees it's biggest decline in 2 years, dropping as much as 6.9% yesterday.
  • Earning season is kicking off in the US. Featured IGTV video below. 

Asian overnight: Trade fears continue to recede, as they have done ever since Tuesday night’s brief panic, with a solid session from Asian markets following on from a good day for US equities.  A softer tone from China and their willingness to resume trade talks with the US is helping a risk on environment as most markets extend near term gains at present. While global equity markets are trading mostly firmer overnight, China's Shanghai Composite has given up 0.4% in early trade. Trade balance data from the region saw a larger than expected surplus realised as exports grew while imports slowed. A new record high for the Nasdaq confirmed the strength of this market, representing an interesting ‘safe haven’ from trade concerns. Australian stocks bucked the trend however, as financials dropped 0.7% to see the index drop 0.3% overall.

Brent crude has seen it's biggest decline in 2 years dropping as much as 6.9% yesterday, a huge move for the black gold, on the back of Libya's state owned oil company saying that it is planning on increasing supply to match the current demand increase. They have also said they are looking at opening all four export channels that have been closed for the last month. This comes on the back of significant worries for energy traders with the Trump tariffs constantly knocking on the door, increasing fears that a knock on to global growth is just around the corner. Today sees the weekly Baker Hughes rig count from the US which is worth keeping an eye on.

UK, US and Europe: President Trump has been causing mayhem in Europe already this week, and now he brings his special brand of magic to the UK. Having dined with the PM last night, today he is in the papers decrying her Brexit deal, setting us up for a fascinating press conference. The economic calendar is sparse today, but US earnings season gets underway in earnest with the release of bank earnings from Citigroup, JPMorgan and Wells Fargo.

South Africa: The Jse AllShare index is expected to open up modestly firmer this morning in line with the mostly positive short term global market sentiment. The rand has clawed back further strength against the majors, which should aid initial gains on local banking and retail counters. BHP Billiton is down 0,7% in Australia suggestive of a softer start for local diversified resource counters. Tencent Holdings is trading more or less flat in Asia, suggestive of a flat start for major holding company Naspers. 

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

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3pm – US Michigan consumer confidence index (July, preliminary): forecast to fall to 98.1 from 98.2. Market to watch: USD crosses

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Workspace Group has seen lettings fall 5% in Q1, though enquiries have risen. Three refurbishment projects completed in June, and six more are expected in this financial year. 
  • DCC said that Q1 profits were in line with expectations, and that it continues to expect profit o be weighted towards the second half of the year. It has also acquired two firms, Stampede and Kondor, with a combined enterprise value of £110 million. 
  • Experian has started the year well, in line with forecasts, with overall revenue growth of 10% in Q1 (at constant exchange rates). 
  • Ashmore saw assets fall $2.6 billion to $73.9 billion for the quarter to 30 June. Despite net inflows, a seasonal slowdown and a stronger US dollar had hit emerging markets hard. 
  • Dawn (SA)  Revenue for FY18 declined by 19/1% to R3.5bn. In H1 F2018 revenue declined by 19,8% and in H2 F2018 revenue declined by 18,3%. Volumes in F2018 declined by 19,1% and price inflation remained flat.

Diageo upgraded to buy at Goldman
Evraz upgraded to buy at Renaissance Capital
IMI upgraded to buy at HSBC
Norwegian Air upgraded to buy at SEB Equities

Featured Video from IGTV

Please note: This information has been prpared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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