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When it rains, it pours; Amazon shares decline - EMEA Brief 01 Feb

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  • Amazon announced a rise in investments, causing shares to fall over 5 percent , however beats earnings per share expectations and revenue, reporting $6.04 per share in comparison to an estimate of $5.68 per share and a revenue of $72.4billion versus %71.9billion.
  • Caxin Manufacturing PMI falls below expectations to 48.3 in January in comparison to 49.7 in December, its lowest reading since 2016
  • Stocks in Asia mostly traded higher, with the Shanghai Composite increasing around 1.3 percent, Shenzhen component and Shenzhen Composite also rising by around 1.7 percent, the opposite to the Hang Seng Index which fell by around 0.18 percent along with the ASX 200 down 0.03 percent
  • Stocks on the S&P 500 jumps 0.9%, totalling a rise of 7.87 percent this month, closing out their best January in three decades. Nasdaq Composite also rises 1.37 percent but the Dow Jones Industrial Average closes just below the flatline.
  • Xi Jinping, China’s leader, reached out to Trump in a letter in hopes of accomplishing a trade agreement before the March deadline.  
  • Deutsche Bank fails to meet profit expectations as its 2018 full-year profit totalled 341million Euros ($390million), compared to analysts estimates of 461million euros
  • Singapore and China to build a city in China to become a home for 500,000 people by ‘converting farmlands into a sustainable urban development’
  • The amount of Gold purchased by central banks, in volume, reaches its highest level since 1967. It is estimated of around 651.5 metric tons were brought in 2018, 74 percent higher than 2017
  • Herman Cain, former presidential candidate under consideration for the FED. Cain previously served at the bank for around 7 years, before moving into the political world, running for president in 2011
  • Senator Bernie Sanders suggests to increase the estate tax levels of those who earn more than $3.5million, affecting an estimate of 0.2 percent of the country. The current tax levels affect those who inherit more than $11million
  • GE shares increase to its highest in 9 years by 18%, after posting better than expected revenue of $33.3billion in its fourth quarter

Asian overnight: A mixed affair overnight has seen gains in Chinese markets overshadow the more subdued downside seen throughout the likes of Japan, Hong Kong, and Australia. Much of the gains in China can be attributed to bullish comments from Donald Trump, who tweeted that China stands ready to import huge amounts of US soybeans. The problem is that China already imported a massive amount of soybeans to begin with, but at least it is a step in the right direction. Unfortunately we also saw some bad news for the Chinese, with the Caixin manufacturing PMI declining further into contraction territory with a reading of 48.3, from 49.7.

UK, US and Europe: Looking ahead, the manufacturing theme looks set to continue, with eurozone (revised) and UK PMI (initial) readings for the sector released during the morning. Also keep an eye out for the eurozone CPI inflation reading, which is expected to decline into a nine-month low. Finally, the US looks set to spark significant volatility, with the release of the jobs report in the afternoon. Last month saw a huge payrolls number, and thus this month expects to see a more subdued figure. Also look out for the manufacturing PMI surveys from the US. On the corporate front, Chevron and Exxon Mobil round off a busy week for earnings.

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

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Source: Daily FX Economic Calendar

9.30am – UK mfg PMI (January): previous reading 54.2. Market to watch: GBP crosses
10am – eurozone inflation (January, flash): prices rose 1.6% in December. Market to watch: EUR crosses
1.30pm – US non-farm payrolls (January): 183K jobs expected to have been created, from 312K, while average hourly earnings rise 0.3% MoM. Markets to watch: US indices, USD crosses
3pm – US ISM mfg PMI (January): indices to fall to 54 from 54.1. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • TalkTalk said that annual earnings would fall short of forecasts, due to investment spending and accounting changes. Guidance was £245-250 million, below the consensus of £259 million.
  • RPC reported flat earnings, with operating profit for Q3 similar to a year earlier, although revenues rose 1.4% to £894 million. The firm said it would engage with Berry Global, which unveiled a competing bid for the firm yesterday.
  • Puma attempts to compete with Nike, releasing a self-lacing shoe in 2020, where individuals can tighten or loosen the laces using an app

Daimler upgraded to overweight at Morgan Stanley
H&M upgraded to reduce at Handelsbanken
Rio Tinto upgraded to add at AlphaValue
Rentokil upgraded to buy at Citi

 

Adidas downgraded to neutral at UBS
Close Brothers downgraded to sell at Citi
Intertek downgraded to hold at Jefferies
Mediaset downgraded to underweight at Barclays

 

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