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Lira rallies and stabilises - EMEA brief 16 Aug



  • China announces a new round of trade talks with the US. 
  • Asian shares, however, hit fresh one year lows on fears of an economic slowdown and the continued Turkish lira volatility.
  • Tencent's earnings shock really weighs on investor sentiment.
  • Amazon is said to be considering UK insurance comparison site.
  • Bitcoin holds above the crucial $6000 mark as crypto traders eye possible bullish reversal.
  • UK retail sales and Canadian ADP figures are the ones to look out for today.

APAC briefingAsian overnight: A somewhat calm session overnight saw a slowdown in the recent rate of decline, with the ASX 200, Shenzhen composite, and Nikkei 225 all trading flat. The losses did continue for the likes of the Topix and Hang Seng, but even they were relatively moderate in comparison with recent moves. News that there will be a resumption of trade talks between the US and China authorities at the end of the month, is helping provide some reprieve for equity markets, whilst the dollar is trading marginally lower.

The breakdown in relations between Turkey and the US remains a key concern, yet with the lira seemingly stabilising over the course of the week, it seems the measures being brought in by the Turkish have held arrest its decline for now. Data-wise, Japanese trade balance moved into a deficit, while a mixed Australian jobs report saw a fall in unemployment overshadowed by the first negative employment change figure in more than a year.

UK, US and Europe: Looking ahead, the UK retail sales release will ensure that markets will remain focused on the pound, following the recent jobs and inflation numbers. Make sure to look for the year-on-year figure given the volatility of monthly retail sales numbers. Also keep an eye out for eurozone trade balance data this morning. In the afternoon, the Canadian ADP jobs number in one of a handful of tier two releases, including the building permits, housing starts and Philly Fed manufacturing index from the US.

South Africa: The rand is off its worst levels from yesterday although remains depressed after comments from Moody's Investor Relations yesterday. The ratings agency has expressed concern about the country's pace of fiscal consolidation as expectations for economic growth are lowered and the public sector wage bill rises. BHP Billiton is down 2.55% in Australia and Tencent Holdings is down 3.1% in Asia. This is not expected to fully translate into losses on our local bourse today, in lieu of a lot of the declines having been priced in yesterday. 

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

2018-08-16 07_50_16-Forex Economic Calendar.png

Source: Daily FX Economic Calendar

9.30am – UK retail sales (July): expected to fall 0.3% MoM and rise 2.9% YoY, from -0.5% and 2.9% respectively. Markets to watch: GBP crosses

1.30pm - US housing starts & building permits (July), Philadelphia Fed Index (August), initial jobless claims (w/e 11 August): permits to rise 1% MoM and starts to be 5% higher MoM. Philadelphia index to fall to 22 from 25.7. Claims to rise to 217K from 213K. Markets to watch: US indices, USD crosses

Corporate News, Upgrades and Downgrades

  • Kingfisher reported a 3.4% rise in sales for the second quarter, to £3.26 billion, while like-for-like sales rose 1.6%. A weak performance in France hit overall growth. 
  • KAZ Minerals said that pre-tax profit rose 48% to $355 million for the first-half, while revenue was up 22%, supported by higher average copper prices and increased copper sales.  
  • Rank Group reported a 7.9% fall in operating profit, to £20.9 million for the full-year, and warned that current trading was proving difficult due to the warm weather seen in the six weeks to 12 August.  

Axa upgraded to buy at Bankhaus Lampe
DNA upgraded to buy at SEB Equities
Saipem upgraded to hold at Jefferies
JCDecaux upgraded to buy at Berenberg

AstraZeneca downgraded to hold at Jefferies
Informa cut to equal- weight at Morgan Stanley
Leoni downgraded to hold at Quirin Privatbank
Petrofac downgraded to hold at Jefferies

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