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Short summit with no agreement- EMEA Brief 28 Feb

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KatherineIG

  • Donald Trump and Kim Jong Un summit cut down to 30 minutes with no agreement reached and the joining signing ceremony cancelled, however, both parties are “looking forward to meeting in the future”
  • Tensions rise as India and Pakistan confirm attacks on both sides, with India admitting to conducting strikes against a militant camp on Tuesday and Pakistan claiming to have shot down Indian jets. This has led to worries of a potential South Asia war with the US, France, Australia and China urging for the situation to not be escalated
  • Jeremy Corbyn to back another EU referendum after his Brexit plan was defeated by 323 votes to 240 on Wednesday, however, will also push for “other options” including a general election
  • Oil prices fall slightly with Brent Crude at $66.15 per barrel, down 24 cents from the latest close, and WTI crude oil at $56.92 per barrel, down 2 cents
  • Labour suspends MP Chris Williamson amid remarks about its party’s handling of anti-Semitism, which he now “deeply regrets”
  • UK production of cars fall in January, its eighth month in a row. Figures show a fall of 18.2% in overall production and a decline of 21.4% in output for destined for exports
  • Trump’s former lawyer Michael Cohen continues to make allegation against Trump, calling him “racist, conman and a cheat”. Cohen also claims that Trump wanted him to lie about a property deal in Moscow, which took place during the presidential campaign, and also provides evidence of Trump giving reimbursements for hush money in regards to an affair with a porn star

Asian overnight: Australian stocks provided the one bright light overnight, with most of the other Asian markets stumbling in the wake pessimistic comments from the chief negotiator in relation to US-China trade. Robert Lighthizer warned that China must do more than simply buy more US goods to avert another breakdown in trade between the two countries. We also saw Donald Trump break off talks with Kim Jong-Un, with the two sides failing to find common ground in the push to make the rogue state denuclearise. On the data front, the NBS manufacturing and non-manufacturing PMI surveys both declined further for China.

UK, US and Europe: Looking ahead, a host of eurozone CPI readings kick of the European session, ahead of a day that is likely to be dominated by the US. Keep an eye out for the Q4 GDP reading for the US in the afternoon, with markets also likely to continue the focus on the potential shift in outlook for the US-China trade talks.

South Africa: The rand remains firm although is slightly off its best levels from the last few weeks. Tencent Holdings is down 0.3% in Asia, suggestive of a similar start for major holding company Naspers. The BHP Group is down 1.1% in Australia, suggestive of a weaker start for local diversified resource counters. This afternoon will see US Advance GDP, a major global data point data being released at 3:30pm (SA time).

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

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Source: Daily FX Economic Calendar

1pm – Germany CPI (February, preliminary): CPI to rise 1.5% YoY, from 1.4%. Market to watch: EUR crosses
1.30pm – US GDP (Q4): QoQ growth rate to be 2.4% from 3.4%. Markets to watch: US indices, USD crosses
2.45pm – US Chicago PMI (February): index to rise to 57.8 from 56.7. Markets to watch: US indices, USD crosses
11.30pm – Japan unemployment rate (January): expected to hold at 2.4

Corporate News, Upgrades and Downgrades

  • Bovis Homes reported a 47.4% rise in pre-tax profit for 2018, to £168.1 million, while volumes rose 3% to 3759. The new year has begun with strong sales, up 15.7% for the same period a year earlier
  • Hastings has increased its full-year dividend by 7%, equivalent to 59% of adjusted profits, and plans to pay out 65-75% of this metric in the future
  • IAG expects 2019 earnings to be flat due to higher fuel costs and air traffic control disruption. Operating profit before exceptionals rose 9.5% to €3.23 billion for the year
  • Tesla potentially lining up $2billion in loans from Chinese lenders, including the Industrial and Commercial Bank of China, to build a massive battery and car plant in Shanghai
  • BOX fails to meet its Q4 revenue expectations, causing share prices to fall 18%. Expected revenue was $164.2million with results showing $163.7million
  • Weight Watchers forecasted a decrease of 10% in membership for the fourth quarter, after consumers left confused with its new name change to WW
     

Iberdrola upgraded to add at AlphaValue
Premier Oil upgraded to buy at Berenberg
Symrise upgraded to outperform at MainFirst
eQ upgraded to accumulate at Inderes

Aareal Bank downgraded to add at AlphaValue
Beiersdorf cut to sell at Independent Research
CompuGroup downgraded to hold at Baader Helvea
Rio Tinto downgraded to neutral at Goldman

 

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