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US-China Trade Deal 'moving along nicely' - EMEA Brief 04 Mar

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  • Reports over the weekend have indicated that the US and China are in the later stages of trade talk discussions in a deal which could see tariffs and sanctions lifted on both sides. Donald Trump tweeted over the weekend asking China to remove all tariffs on agricultural products and that trade talks are "moving along nicely". 
  • Asian equity markets reacted positively to the trade talk progress; the Nikkei rose 1%, whilst the Shanghai Composite increased by 2.5% and the Hang Seng jumped 1.2%.
  • Theresa May has announced a £1.6bn fund for pro-Brexit constituencies which would be used to boost economic activity in these areas, although some believe she is doing this purely to "bribe MPs" in voting for her withdrawal agreement.
  • WTI Oil rose 0.3% to $55.96 per barrel due to signs of slowing US production and OPEC continuing their cutbacks.
  • Gold increased by 0.1% to $1295 per ounce.
  • Ted Baker CEO Ray Kelvin has resigned from the company, which he founded in 1988, with immediate effect due to allegations of inappropriate behavior. The news adds to the turbulent couple of weeks for the retailer as the company issued a profit warning last week.

Asian overnight: A positive start to the week has seen Asian markets push higher ahead of a crucial week of economic data. Optimism over a potential US-China trade deal continue to add fuel to the fire for bulls, with a mooted summit between Xi Jinping and Donald Trump on 27 March raising the prospect of a final deal. Looking ahead, a somewhat slow start to a busy week sees the UK construction PMI dominate. With the survey falling sharply towards contraction territory (50.6), all eyes will be focused on whether we see a continuation of that weakness seen last month. 

UK, US and Europe: Mrs May has come under-fire over her new £1.6bn 'Stronger Towns Fund', which she says will create jobs and boost economic activity in pro-Brexit towns. The PM outlined that "communities across the country voted for Brexit as an expression of their desire to see change - that must be a change for the better, with more opportunity and greater control". Although, some people have suggested that this is a "desperate measure to buy votes" in order to push her withdrawal agreement over the line as it has been announced just days before MPs are scheduled to vote on her Brexit deal.

South Africa: Global equity markets continue to trade higher on optimism that the US and China could be nearing a trade deal. While the dollar has softened a bit this morning it comes off the back of significant strength on Friday after the US posted better than expected GDP data. Gold trades back below the $1300/oz mark in part due to the stronger dollar and reduced safe haven demand for the precious metal on improving trade relations (with China). The rand is back above the R14/$ mark. Tencent Holdings is up 3.3% in Asia suggestive of a strong start for Naspers. The BHP Group is up 1.2% higher in Australia suggestive of a positive start for local resource counters.

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

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Source: Daily FX Economic Calendar

9.30am – UK construction PMI (February): forecast to fall to 50.1 from 50.6. Markets to watch: GBP crosses

Corporate News, Upgrades and Downgrades

  • Senior has reported a 17% rise in annual profit, with pre-tax profit hitting £61.3 million. Revenue rose 5.7% to £1.08 billion. 
  • British American Tobacco said it was ‘extremely disappointed’ that the Quebec court of appeal had not overturned a decision against its Canadian subsidiary. 
  • 888 has bought BetBright’s sports betting platform for £15 million. 
  • Aviva has announced Maurice Tulloch as its new CEO this morning, Mr. Tulloch has been at the company since 1992 and takes over from Mark Wilson.

Ageas upgraded to hold at HSBC
Carlsberg upgraded to outperform at RBC
Sievi Capital upgraded to accumulate at Inderes
Evolution Gaming raised to buy at Kepler Cheuvreux

Acciona downgraded to neutral at Citi
Centamin downgraded to neutral at CI Capital
Heineken downgraded to sector perform at RBC
Victrex downgraded to sell at Cit

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