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Lacklustre Lunar New Year - EMEA Brief 11 Feb

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MichaelaIG

  • Chinese markets were mixed during the Monday session after being offline for much of last week due to the Lunar New Year holiday. The Shanghai composite gained 0.8% whilst the Hang Send index rose 0.23%. However following Samsung electronic decline of 0.67% the Kospi remained slightly lower after promising recovery from earlier losses. 
  • Oil prices fell over 1% despite refinery fire in Illinois which resulted in shutdown of large crude distillation unit. International Brent Crude futures down 71 cents settling at $61.39 a barrel. 
  • US government shutdown could potentially reoccur as talks between congressional Republicans and Democrats have again broken down with agreement as Trump continues to dig in heals over US-Mexico border wall budget.  
  • Theresa May responded to Corbyn's letter which set out five demands for a Brexit deal, her reply concluded with hope that the two parties could have further talks on the matter.  Nevertheless will Valentines Vote see further love lost between opposing parties?  
  • The Swiss Franc (CHF) saw mini "flash crash" of almost 1% due to Japanese holiday causing thin liquidity. The CHF slid from 1.0004 per dollar to 1.0096 the lowest since November. 
  • Apple verse Huawei war sees the iphone brand's shipment plummet by estimated 20% in last year's final quarter. 
  • Aurora Cannabis Inc is scheduled to announce second quarterly earnings today, However with EFTMG Alternative Harvest ETF and Horizons Marijuana Life Sciences Index  ETF showing larger than 10% drops since October could the cannabis industry be coming down from that original legal high?  

Asian overnight: Chinese stocks were the big outperformer overnight as they played catch up following a week-long break. This time it is the Japanese who are away, with National Foundation day seeing markets closed. Elsewhere, marginal gains in the Hang Seng were counteracted by downside in the Australian ASX 200. This is despite the commencement of yet another round of trade talks between the US and China, as both sides seek to find some form of resolution to the current trade standoff ahead of the 1 March deadline. However, with Trump stating that he has no plans to meet Xi Jinping before that deadline, many believe it diminishes the chance of a comprehensive deal to stave off higher tariffs.

UK, US and Europe: Looking ahead, a whole raft of economic data from the UK means that the pound will be in focus for traders in the European session. Monthly GDP (December), Q4 GDP, manufacturing production, industrial production, trade balance, and the NIESR GDP forecast for January all tally up to a likely volatile session for UK stocks and the pound. Elsewhere, apart from the Canadian trade balance, this looks like a day largely devoid of any major releases outside of the UK.

South Africa: While China and Hong Kong equity markets are firmer this morning playing catch up after being closed for the Lunar New Year's festivities last week, US equity indices are trading marginally lower this morning. This is expectant of a flat to weaker start to our local bourse today. The rand has weakened sharply following news that major power utility would be embarking on nationwide blackouts in lieu of capacity constraints within the country. The dollar has also resumed some short term strength and is weighing on precious metal prices. BHP is up 2% in Australia, suggestive of a similar start for the locally listed entity. Tencent Holdings is up 1.8% in Asia, although this may already be priced into major holding company Naspers.

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

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9.30am – UK trade balance (December), industrial & manufacturing production (December), GDP (December): trade deficit to narrow to £1.9 billion, while GDP to growth 0.3% MoM, and at a three month average of 0.3%. Q4 preliminary GDP reading to grow 0.3% QoQ and 1.3% YoY. Market to watch: GBP crosses

Source: Daily FX Economic Calendar

 

Corporate News, Upgrades and Downgrades

  • Acacia Mining said that gold production for the year would be flat despite output beating guidance for 2018 thanks to higher production at its North Mara field. Gold production was 521,980 ounces, above the 435-375 thousand ounce guidance, but down 32% on last year.
  • Telford Homes has acquired a site in Stratford for £20 million. It is expected to provide space for 380 new homes.

AAK upgraded to accumulate at Handelsbanken
Bank of Ireland raised to overweight at Barclays
Metro Bank upgraded to hold at Berenberg
Lloyds upgraded to overweight at Morgan Stanley

Barratt downgraded to hold at Liberum
Bovis Homes downgraded to hold at Liberum
Petrofac downgraded to neutral at JPMorgan
RBS downgraded to equal-weight at Morgan Stanley

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