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Comcast / Disney bidding war ends - EMEA brief 20th July



  • Asian equity markets are mixed, however some pushed higher overnight over a volatile trading session as the Chinese yuan bounced off a one year low.
  • Trump showed displeasure towards the Fed's hikes, criticising policy and highlighting concerns on the potential impact of rising interest rates on the US economy causing the Dollar to sag.
  • The Comcast / Disney bidding war for 21st Century Fox ended yesterday with the former pulling out of the race. Comcast still plan on pursuing Sky.
  • 70% of Royal Mail shareholders opposed a pay package deal for their new incoming CEO.
  • Airbus and Boeing have seen combined orders of nearly 1000 aircraft as this years Farnborough Air Show. This week has shown strength in the aviation industry with the UK government also unveiling plans for its 6th gen fighter jet, the ‘Tempest’.
  • A new test network has been launched for Raiden, an Ethereum payments channel project introduced as a potential solution for the cryptocurrencies scalability issues. Have your say on which new cryptocurrency IG offer in our community poll.

Asian overnight: Markets in Hong Kong struck a ten-month low yesterday, as Asian shares continued to suffer thanks to concerns about global trade wars. Australia was the sole point of light, rising 0.3%, with only materials stocks lower. China’s currency continued to weaken as well, crossing the Rmb6.8 mark against the dollar for the first time in a year. Markets are speculating that the Peoples Bank of China (PBOC)  will look to intervene in currency markets in lieu of the Yuan's recent decline.

The yuan against the dollar, down to 6.8211 after sliding as much as 0.7 percent, is currently at its weakest level in a year.  It is now trading above the 6.7 mark, which historically has proved to be a strong support level for the yuan.

UK, US and Europe: UK monthly retail figures disappointed yesterday forcing GBP lower and the chance of an August rate hike continuing to slide. High street retail is facing serious problems at the moment with Poundworld closing the last 190 of its stores as early as August 10th, and Goucho Groups ‘Cau’ chain set to go as the group heads into administration. Online competition, high rents, and a shifting discretionary consumer spending habit are the primary factors as Brexit and potential rising interest rates (and therefore larger mortgage repayments) weigh on many spenders minds. Premium ‘restaurant style’ deals at supermarkets, which really came into their own after the 2008 debacle, continue to be a cost efficient, easy alternative for many, whilst large online retailers such as Amazon (which saw its market cap nudge past $900bn a couple of days back) continue to thrive.

The International Monetary Fund warns that a "no deal" Brexit would also be economically harmful to Eurozone countries, not just the UK. All goods and services would have to undergo stricter checks by the EU at its borders, complicating the systems currently in place. Estimates say that a "no deal" Brexit would cost the EU 1.5% of its GDP, or 250 billion euros.

Looking forwards, the losses seen in the Asian market are expected to continue in Europe, with small drops for indices expected. Canadian CPI is the sole macro point of interest, while on the earnings front General Electric and Schlumberger report figures. The US dollar will also be in focus after President Trump commented that further rate increases could derail the economic boom in the US.

South Africa: The rand slid even further than its emerging market currency peers yesterday after the South African Reserve Bank lowered its forecast for economic growth in 2018 to 1.2% from 1.7% previously. The rand has however posted a modest recovery this morning, although the longer term trend appears to remain that of weakening. Precious metal prices remain subdued , although palladium looks to have bucked the trend posting a near 2% gain. Crude prices are slightly firmer this morning. BHP Billiton is 2% lower in Asia this morning suggestive of a softer start for local diversified miners. Tencent is flat on the day, suggestive of a flat start for major holding company Naspers, which accounts for around a 20% weighting in the JSE Top40 index. 

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

1.30pm – Canada CPI (June): forecast to be 2.5% YoY from 2.2%, and 0.3% MoM from 0.1%. Core CPI to be 1.5% from 1.3% YoY. Markets to watch: CAD crosses

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Beazley reported pre-tax profit of $57.5 million for the first half, down from $158.7 million a year earlier. Gross premiums were up 25% to $1.32 billion.
  • Homeserve said that growth prospects for FY 2019 are good, thanks to in-line performance for the 1 April to 19 July period.  
  • Unilever has commenced the second half of its €6 billion share buyback, which is expected to finish prior to the year-end. 

Corem Property Upgraded to Buy at Kepler Cheuvreux
NP3 Fastigheter Raised to Buy at Kepler Cheuvreux
Recordati Upgraded to Buy at Goldman
Orion Upgraded to Hold at Jefferies

Deoleo Downgraded to Underperform at BBVA
EON Cut to Equal-weight at Morgan Stanley
Kone Downgraded to Hold at DNB Markets
Outokumpu Downgraded to Hold at SEB Equities

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