Europe
European equity markets are a mixed bag this afternoon. The major equity benchmarks started off strong today after Beijing announced plans overnight to trim the tax rate for small businesses. It was the latest move by the Chinese government to try and encourage economic activity. The fact that a large portion of the gains have been handed back suggests that investors are not overly confident the Chinese economy will suddenly stop cooling. The firmer oil price has helped BP (LON:BP) and Royal Dutch Shell (LON:RDSa), which in turn has helped the FTSE 100.
Boohoo (LON:BOOH) issued an upbeat update, but the positive move in the stock was short lived. The online fashion house announced they expected group revenue to increase by between 43% and 45%, which was an improvement on the previous guidance of between 38% and 43%. The group narrowed its earnings forecast too, and now foresees that earnings margin will be between 9.25% and 9.75%. While the previous guidance was from 9% to 10%. The stock has been moving higher since late December, and a break above 200p, might bring the 215p region into play.
Provident Financial (LON:PFG) shares have sold-off severely today after the troubled lender issued a profit warning. The firm said that profit will be at the lower end of the £151 million to £166 million range, and it blamed higher payment arrangements at its credit card unit for disappointing update. The lender has seen some ‘pressure on delinquency and arrears metrics’ in the second-half of the year. The group has received negative press in recent years as its credit card division had to issue refunds to over 1 million clients, and the car loan business was under investigation by the financial regulator. The banking division added 366,000 new clients on an annual basis, but that compares with the 437,000 that were added last year. The stock has been range bound for the past 17 months, and in light of today’s gap lower, it might retest the 400p region.
Hays (LON:HAYS) had a respectable performance in the second-quarter thanks to its German operation – which saw a 15% increase in fees. Germany is its largest market, and made up for the mediocre performance at the British division, which saw fees increase by 3% on a like-for-like basis. Some uncertainty in relation to Brexit, has prompted employers to hold steady in relation to hiring. The share price has been in decline since September, and if the bearish move continues it might target the 130p area.
US
The Dow Jones and S&P 500 are higher this afternoon as traders are cautiously optimistic about the state of the global economy. The change in Chinse tax laws shows us that Beijing are keen to assist their economy, and that overshadows the concerns about a global slowdown, at least for now. Like their European counterparts, we have seen some of the early gains eroded.
On a month-on-month basis, PPI dropped by 0.2% in December, which exceeded the 0.1% decline, and keep in mind, the November rate showed of 0.1% growth. The drop in PPI might lead to a cooling of CPI in the months to come.
JPMorgan (NYSE:JPM) saw fourth-quarter earnings per share (EPS) came in at $1.98, while equity analysts’ were expecting $2.20. Revenue from fixed income, currency and commodity trading (FICC) was $1.86 billion, which undershot the $2.2 billion forecast. Group revenue ticked up by 4% to $26.8 billion, slightly below forecasts. Net interest margin edged up by slightly, but so did non-interest expenses.
Wells Fargo (NYSE:WFC) had mixed results. Fourth-quarter EPS were $1.21, and topped forecasts. Revenue for the period was $21 billion, which undershot the consensus estimate of $21.7 billion. The bank confirmed that the growth rate of chequing accounts was 1.2%, which compares with 1.7% in the fourth quarter.
FX
EUR/USD has been hit by a positive move in the greenback. According to the German Federal Statistics Office, the economy grew by 1.5% in 2018, down from 2.2% in 2017. Last year’s figures were the weakest growth rate in five years. France’s and Italy’s annual CPI annual readings were 1.9% and 1.2% respectively, both were unchanged. The eurozone is undergoing an economic cooling.
GBP/USD is in the red on account of the firmer US dollar. Traders will be paying close attention to the vote in parliament this evening. The deal Prime Minister May has reached is deeply unpopular and it is likely to be voted down. The majority of MPs seem to agree that they dislike May’s deal, but they are much divided about an alternative. The way things are looking, we could be heading towards an accidental no-deal Brexit.
Commodities
Gold is experiencing low volatility, and the metal remains in the wider upward trend that has been in place since November. Recently, the commodity has run out of steam near the $1,300 mark. Should the metal break above the $1,300 mark, it might bring $1,326 into play.
Brent crude oil and WTI rebounded today as dealers are more optimistic about the state of US-China trade relations. The energy market suffered yesterday in the wake of the poor Chinese import figures, and today we have seem bargain hunters swoop in. Recently, there has been a positive correlation between oil and equities, and the volatility in stocks might spill over to oil.
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