Europe
Equity markets have bounced back as traders are a little less fearful about China’s slowdown as they once were. Beijing has accepted an invitation from Washington DC to re-start trade negations, and dealers are viewing this as a step in the right direction. Economic advisor to President Trump, Larry Kudlow, confirmed the talks will go ahead. There are still legitimate fears about China’s economy, but for now, bargain hunters are content to snap up copper, and mining stocks like Glencore (LON:GLEN), BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO).
The Turkish lira has gained ground in the wake short-selling restrictions, and Qatar’s promise to lend the country $15 billion. Nerves are a little calmer and for that reason, we are seeing funds flow back into eurozone stocks. A crisis is rarely solved quickly, and traders are likely to remain cautious. President Erdogan can’t rely on quick fixes forever, and eventually, the slump in the lira will catch up with Turkey in the form of higher inflation.
Kingfisher (LON:KGF) had a solid second-quarter as group same-store-sales jumped by 1.6%, and the warm weather was a contributing factor. The B&Q division saw a 3.6% rise in sales, and the Screwfix unit registered a 5% jump in sales. The strong performance in the second-quarter could have been a result of the freezing cold temperatures that were endured at the start of the year. The French operation continues to drag on the group as sales slipped by 3.8%. Kingfisher is already in the process of restructuring the group, and the business in France could be in line for further transformation. The stock has been broadly moving lower since February, and while it remains below the 200-day moving average at 318p, its outlook could be negative.
Rank shares are in the red after the company revealed a 40% fall in full-year profit. Total revenue slipped by 2.2%. The gaming sector has had to endure tougher rules and regulations. Rank cited the warm weather as a factor in the poor performance too, as bingo halls and casinos aren’t as popular when the sun is out. Footfall at sites is in decline and the company announced plans to turnaround the business, and have more of a focus on online gaming. The stock has been in decline since December 2017, and if the negative move continues it could target 166p.
US
Larry Kudlow, economic advisor to President Trump, confirmed that trade talks between the US and China will resume later this month. The recent slump in Chinese stocks and the renminbi could weaken Beijing’s hand in the negotiations. Mr Kudlow made it clear the US administration will be pushing for a good deal. This has boosted stocks as traders are optimistic that progress will be made.
Today’s economic announcements were mixed. Jobless claims slipped from the revised 214,000 to 212,000, and the consensus estimate was 215,000. The Philly fed manufacturing report fell from 25.7 to 11.9 – the lowest level in nearly two years. The housing starts report missed the forecast, while the building permits update were in line with estimates.
Walmart (NYSE:WMT) shares are in demand after the retailer registered strong second-quarter results. Same-store-sales jumped by 4.5% - its highest rate in over a decade. Total revenue jumped by 3.8% to $128 billion, topping the consensus estimate of $125.9 billion, and earnings per share were $1.29, while analysts were anticipating $1.22. The US online division registered a 40% jump in sales.
Meanwhile, JCPenney shares slumped after the retailer revealed a fall in second-quarter revenue and lowered its outlook.
FX
GBP/USD was jolted higher by the impressive retail sales figures from the UK. In July, retail sales jumped by 0.7%, which easily topped economists’ expectations of 0.2%, and was an impressive turnaround from the 0.5% decline in June. The sales report that strips out fuel saw an increase of 0.9%, while the consensus estimate was only 0.1%. The rally on the back of the retail sales report was short lived, but sterling caught a bid as the greenback softened in the afternoon.
EUR/USD has been helped by the calming of nerves regarding Turkey. The euro took a knock while the Turkish lira was in freefall, and now that there has been some stability has returned to the situation. The single currency may be higher today, but it still doesn’t change the fact that eurozone banks have exposure to Turkey.
Commodities
Gold has bounced back after the severe sell-off yesterday – where it fell to its lowest level since early 2017. The slide in the greenback has given a boost to the short-covering and bargain hunting. Should the gold market push higher from here, the $1,200 mark might act as resistance.
WTI and Brent crude oil have recouped some of yesterday’s lost ground. Traders swooped in to pick up the relatively cheap commodity. The news that US-China trade talks will resume later this month bodes well for oil, as protectionist policies often stunt economic growth, which may weaken demand for oil.
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