Europe
Stocks are in the red heading into the close after it was reported the mood in Beijing in relation to a deal is ‘pessimistic’. It is believed that China are not happy that President Trump is not interested in rolling back on tariffs.
The news hit stocks around Europe but it is a minor setback in the process. The trade spat has been going on for over one year, and this is the latest hiccup. It is likely that this is a ploy by China, but for now dealers are keen to adopt a more risk-off approach.
Consort Medical (LON:CSRT) have agreed to be taken over by Recipharm publ AB (LON:0QSD) in a deal that is worth roughly £505 million. The news sent Consort's shares soaring. Recipharm offered 1,010p for Consort shares, which is more than 39% above the share’s closing price on Friday. It is a generous premium, but Recipharm predicts it will see a jump in profitability once the transaction is completed. Recipharm shares have lost ground throughout the session so it appears that traders are a little unhappy with the move, it is possible they are concerned about the hefty bid.
Aviva (LON:AV) shares are in the red after the group confirmed it will hold on to its operations in Singapore plus China. Previously there was talk the group would spin off its Singapore business. The insurer reiterated that both businesses saw ‘double digit operating profit growth in 2018’, which makes you wonder why they were considering selling the divisions in the first place.
IQE (LON:IQE) cut their full-year revenue guidance, and it was the second time it was lowered in five months. The company now expects annual revenue to be between £136 million and £142 million, while the previous guidance was £140-£160 million. The firm now anticipates to post a mid-single digit loss for the year.
IQE is caught in the cross fire of the US-China trade war, and the restrictions regarding Huawei have had a negative impact on the firm. With the way things are playing out in terms of the trade negotiations, IQE could remain under pressure in the medium-term.
US
The mood on Wall Street is slightly subdued on the back of the ‘pessimistic’ comment from Beijing. The Dow Jones closed above 28,000 last week, but today it is slightly in the red as dealers trim their equity positions as the bullish sentiment has cooled. In the grand scheme of things, stocks are still strong when you consider how much equities have travelled in recent weeks.
HP (NYSE:HPE) knocked back a $22 per share approach from Xerox. The move from the board of HP was unanimous, and the group claimed it undervalued the firm. HP are in the process of a major restructuring scheme as the organisation plans to slash the headcount by 7,000-9,000 by 2022. The drastic reorganising programme will equate to savings of $1 billion per year. It appears that HP want to pursue with their own restructuring plan rather than being taken over by Xerox. Companies don’t like being snapped up when they are going through a rough patch, and it appears that’s what Xerox wanted to do.
Over the weekend, Ford (NYSE:F) unveiled its first all-electric SUV – the Mustang Mach-E. The auto sector is switching lanes as electric as well as hybrid vehicles are becoming more popular. People are becoming more concerned about the climate so there has been a drive to electric vehicles. Ford are overhauling their business, and the push for more environmentally friendly vehicles is a part of the wider strategy.
FX
Prime Minister Johnson has declared that all the Conservative candidates standing in next month’s general election have pledged to support the deal he reached with Brussels. Seeing as the latest opinion polls have put his party in the lead, GBP/USD is pushing higher today. Sterling is in demand, but it might find it difficult to exceed the October highs as the political risk of the election is still playing on traders’ minds.
A broad dip in the US dollar has helped EUR/USD. It was been a quiet day for European economic indicators but while the currency pair holds above the 50-day moving average at 1.1041 it should seek to retest the 1.1100 area.
Commodities
Gold is in demand thanks to the slight edge towards a more risk-off strategy. The mildly ‘pessimistic’ news regarding the US-China trade situation has encouraged dealers to buy into the gold market.
Gold recently fell to a three month low, which coincided with a bullish run in equities, so now we are seeing the reversal. The dip in the greenback is also helping the metal too as the inverse relationship between the two markets is playing out today.
The oil market continues to be dragged around by the state of the US-China trading relationship. Traders are fearful about demand levels as world-wide manufacturing is suffering, and as of today the trade story has turned slightly sour. President Trump doesn’t seem keen to roll back on tariffs – which is holding up the trade negotiations.
WTI in addition to Brent crude have been pushing higher for the past six weeks, but while the trade spat continues, any positive moves are likely to be limited.
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