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Ford Pulls Brakes on Brazil Factory - EMEA Brief 20 Feb

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MichaelaIG

  • Ford announced plan to close a factory in Brazil, resulting in 2,800 job cuts. This follows as Ford pulls sale of heavy commercial trucks in South America. 
  • May will return to Brussels again in further attempt to reach conclusive agreement on the controversial Irish-backstop.  
  • Asian stocks saw a mixed session following similarly mixed U.S. trade talk reports. Whilst Trump commented positively on trade talks and it was reported that the U.S. is requesting China keep the yuan stable as part of the deal, Trump also hinted that March deadline was not a "magical date" and could be pushed back. Nikki share average rose 0.7% hitting 2 month high. 
  • Devon Energy shares gained 6% after announcing fourth-quarter earnings and plans to separate Canadian and Barnett Shale assets. The  Oil producer also announced $5 billion addition to stock buyback plan. 
  • Gold surged to near 10 month high. Spot gold rising 0.9% to $1,388.62 per ounce and U.S. gold futures hit $1,342.40, a 1.54% increase. Palladium continues to set record highs as shortages cause further surge to sit above $1,500 an ounce. 

Asian overnight: A mixed session saw losses in China and Australia counteracted by Japanese and Hong Kong upside. Once again, markets look towards US-China trade talks (due to resume on Thursday) as a key driver of market sentiment. We also saw the Japanese trade data post a disappointing exports figure (-8.4%) which hurt the overall trade balance, and ultimately the Yen.

UK, US and Europe: Looking ahead, the economic calendar remains light, with the eurozone consumer confidence figure providing the one notable release in the morning. We also see Theresa May meet up with European President Jean-Claude Juncker in Brussels today, ensuring the pound remains in the spotlight after yesterday’s jobs numbers. Finally, watch out for the minutes from the last FOMC meeting, with markets hoping to get a better idea of exactly how long they will hold off until the next rate hike.

Democratic-led House panel has launched an inquiry into White House plan to transfer US nuclear technology  to Saudi Arabia. Concerns focus on the volatile nature of the Saudi region, whilst Saudi Arabia has stated that the nuclear power is desired in order to diversify its energy sources. Could this once again controversial move by Trump help US Senator Bernie Sander in his second bid for president in 2020? 

South Africa: We are expecting a postive start to trade today as US markets closed firmer overnight and Asian markets trade firmer this morning. Further suggestions that Trump may extend the trade truce with China amidst ongoing negotiations is providing some of the positive sentiment in markets. Metal prices have risen, particularly that of precious metals. Oil is flat on the day. South Africans will look to today's budget speech for further guidance on a rescue plan for Eskom and its possible impact on the country's credit rating. The anticipation of the upcoming budget has seen the rand amongst the worst performing emerging market currencies as of late. Tencent holdings is up 1.25% in Asia suggestive of a similar start for major holding company Naspers. BHP Group is up 2.5% in Australia suggestive of a positive start for local resource counters.

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

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3pm – eurozone consumer confidence (February, flash): expected to fall to -8.2 from -7.9. Markets to watch: EUR crosses

Source: Daily FX Economic Calendar

 

Corporate News, Upgrades and Downgrades

  • Sainsbury said that it was disappointed with the Competition & Markets Authority, after the regulator found ‘extensive competition concerns’ relating to the proposed merger with Asda. The firm said it fundamentally disagreed with the findings that might require either blocking the deal or selling off a large number of stores and other assets.
  • Lloyds reported a 24% rise in statutory profit, to £4.4 billion, for 2018, while underlying profit was £8.1 billion, up 6%. The improvement was due to a reduction in operating costs and the PPI insurance charge. The dividedn was raised 5% to 3.21p, but the firm also proposed a share buyback o £1.75 billion.
  • Glencore has announced a share buyback of $2 billion, along with a $2.8 billion dividend, while saying that adjusted EBITDA rose 8% in 2018 to $15.8 billion. Glencore will also cap its coal production at 150 million tonnes per year.

Bakkafrost upgraded to buy at SEB Equities
Ipsen upgraded to neutral at Goldman
Credit Suisse upgraded to hold at Berenberg

ACS downgraded to underweight at Morgan Stanley
Axel Springer downgraded to hold at HSBC

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