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Turkish lira crash - EMEA brief 25th July

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JamesIG

  • The Turkish lira crashes yesterday as the central bank decided to keep rates unchanged despite soaring inflation.
  • The UK housing market looks to remain stagnant as figures released by HMRC showed housing transactions slipped last month by as much as 3%. House sales were down nearly 6% YoY. Housing market data in the US set to release today, so keep an eye out at 12 midday and 3pm for mortgage apps and new home sales figures. 
  • Banking shares continue to gain globally. Metro bank has said profits have quadrupled YoY in the first half, driven by continued strong growth in deposits, whilst UBS gave better than expected results yesterday. There are a number of prominent European banks set to release results this week, so keep an eye out for trade opportunities. 
  • Oil gained yesterday as traders factored in an expected Chinese stimulus package, as well as concerns on the US/Iran tensions which could significantly disrupt oil supplies. For energy traders this would be a story to keep an eye on, along with weekly inventories at 3.30pm.
  • Bitcoin jumps to its highest level since May on reports the SEC is set to approve a crypto ETF.

Asian overnight: A mixed affair overnight saw gains in Japan and Hong Kong counterbalanced by losses throughout Chinese and Australian indices. Asian Markets are trading mostly firmer this morning although gains on the  Shanghai Composite are modest and the Australian All Ordinaries Index is slightly lower on the day. Considering the gains seen in US markets off the back of Alphabet earnings-fuelled tech stocks, the underlying momentum for global markets should be positive. The announcement from Chinese authorities that they would raise spending and bring some projects forward certainly provided a boost earlier in the week, yet the effects seems to be waning today. Data-wise, Australian CPI came in as expected, remaining at 0.4%.

UK, US and Europe: US Index Futures are trading lower this morning to partially offset gains on major US Indices last night. Looking ahead, we look set for a somewhat quiet economic calendar, with German business climate representing the only event of note through the European session. The US session will likely focus on the latest US crude inventories numbers, while new home sales could also figure for some traders. Instead we see a significant impact from earnings, with Facebook, GM, Ford, Boeing, and Qualcomm ensuring that the corporate influence remains elevated.

South Africa: Asian Markets trading mostly firmer this morning leads to the suggestion that the South Africa Top 40 Index is set to have a relatively flat open today, in what is a relatively quite day of economic news flow. Base metal prices have continued to rebound on optimism that the Chinese government will pursue stimulus measure to help offset the trade war risks to the market place. Precious metal prices are flat on the day. BHP Billiton is up over 2% on the Australian All Ordinaries, suggestive of a positive start for local diversified resource counters, although a firmer rand could temper these gains somewhat. Local banking and retail counters should find the strengthening domestic currency a partial catalyst for gains this morning. 

Economic calendar - key events and forecast (times in BST)
1427401941_2018-07-2507_45_28-ForexEconomicCalendar.png.8805f8afbe68b86dc9986197ee593dd9.png

9am – German IFO index (July): business climate index to rise to 102.2 from 101.8. Market to watch: EUR crosses

3pm – US new home sales (June): forecast to fall 2.8% MoM from a 6.7% rise. Market to watch: USD crosses

3.30pm – US EIA crude inventories (w/e 20 July): stockpiles forecast to fall by 2.7 million barrels, from a 5.8 million increase a week earlier. Markets to watch: Brent, WTI

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • Tullow Oil reported a pre-tax profit of $55 million for the first half of the year, from a $348 million loss a year earlier. Revenue was up 15% to $905 million and net debt fell to $3.08 billion. The firm said that it did not yet believe a dividend was appropriate. 
  • Vodafone reported a 4.9% fall in revenue for the first quarter, but annual organic adjusted earnings guidance was left unchanged at 1-5%. 
  • ITV said that first-half adjusted pre-tax profit fell 7% to £354 million, but revenue was 8% higher at £1.85 billion.  
  • AECI Ltd Interim results showed headline earnings per share to have increased by 19% from the prior year's comparative interim period. 

Applus Upgraded to Overweight at JPMorgan
UBS Upgraded to Buy at SocGen
B&M European Upgraded to Buy at Citi
Kingfisher Upgraded to Neutral at Citi

boohoo Downgraded to Neutral at Citi
BT Downgraded to Sector Perform at RBC
Peugeot Upgraded to Hold at DZ Bank
Ryanair Downgraded to Reduce at AlphaValue

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Please note: This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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