US-China tensions build ahead of G20 summit; May urges MPs to embrace deal

27 November 2018

US-China tensions build ahead of G20 summit; May urges MPs to embrace deal

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Market news

Most equity markets are slightly lower today in the face of further jostling between the US and China. With the respective presidents due to come face to face at the G20 summit in Argentina this weekend, investors are betraying a few nerves after Donald Trump’s latest threat to expand the scope of tariffs on Chinese imports “if we don’t make a deal”.

Last week, the S&P 500 fell 3.8%, erasing this year’s gains in the process, as concern grew over the outlook for global growth. Persisting uncertainty with regards to Brexit arrangements added to negative sentiment and encouraged Europe’s Stoxx 600 index to fall 1.0% while the FTSE 100 retreated 1.9%.

Meanwhile, sterling has dropped below $1.28 due to political tension in the UK. Focus is on the government’s prospects of getting the withdrawal agreement through parliament. The EU must achieve a similar feat at a summit of the region’s leaders, but it is thought that the continent has the better side of the deal. The UK parliament has a vote on December 11th and Theresa May has urged her cabinet to persuade MPs to embrace the deal.

In Europe, Italian debt rallied last week at the prospect of more austere fiscal policy after the European Commission rejected preliminary budget plans from Italy’s populist coalition government. Yesterday, however, the government said it would stick to its plans, setting up a potential standoff with the EU. Separately, the euro area Flash Composite Purchasing Managers’ Index, a measure of business activity in Europe, came in at 52.4, its lowest since late 2014.

Japan’s Topix index rose 0.7% overnight, helped by financial and telecoms stocks, but the country is still struggling to generate any meaningful inflation. Japan’s core consumer price growth stalled in October, rising 1% year-on-year, the same as the previous month. It means the key inflation marker sits only half way towards the Bank of Japan’s target.

Finally, Brent crude oil has suffered another week of losses, currently managing to just remain above $60 a barrel. Last week’s decline was somewhat moderated by Trump voicing support for OPEC price targeting.

 

Economic data*

Share Closing Values at 1/10/18 Year high Year low
FTSE 100 7,036 7,904 6,852
FTSEurofirst 1,411 1,588 1,371
DAX 11,335 13,597 11,009
DJ Industrial Average 24,640 26,952 23,345
S&P 500 2,673 2,931 2,581
NASDAQ 7,082 8,133 6,631
Hang Seng 26,332 33,484 24,541

 

UK Gifts % Yield Price
10 Year 1.4 102.0
2 Year 0.8 102.0
5 Year 1.0 99.0
30 Year 2.0 89.7

 

FOREX versus US Dollar Last % Change**
British Pound 1.28 -0.57
Euro 1.13 -0.09
Japanese Yen 113.59 -0.03
Canadian Dollar 1.33 0.02

 

Commodities Price (USD) Change** % Change**
Brent Crude Oil 60.48 0.47 0.78
Light Crude 51.63 0.15 0.29
Gold LBMA 1,222.28 0.46 0.04
 
* Source: Thomson Reuters
** From previous day close

 

Stock focus

This morning’s main story is that Thomas Cook has released a second profit warning, just two months after causing the City to reduce its forecasts following a first warning. Shares are down more than 21% at time of writing as the market digests the airline’s admission that “2018 was a disappointing year”, blaming the UK’s heatwave for a lack of passengers.

More positively, shares in Greggs have jumped 13% today after announcing that bumper sales in October and November mean that profits in 2018 should be stronger than previously expected. The bakery chain said that sales increased by 9% in the previous eight weeks and that its expanded Christmas range should continue momentum.

Shaftesbury, the London West End-focused property developer, has reported a fall in profit this morning which it partly attributed to lower valuation gains. The company was positive about underlying performance, however, saying it was “largely unaffected by widely-reported headwinds affecting the national economy and consumer confidence”.

Pennon Group has reported an 8.7% rise in first-half pre-tax profit this morning, generated out of a 3.1% rise in revenue. The FTSE 250 water-to-waste company said it was on track to meet its full-year expectations of earnings and cost savings.

Capita revealed last week that it has agreed a strategy to reduce its pension deficit, a plan that will take four years and cost £176m. Current boss Jonathan Lewis was heavily critical and too short-term focused when he arrived in January. He claimed that the pension agreement was “an important milestone in Capita’s transformation”.

Centrica’s share price fell as much as 8% last Thursday, to its lowest level in six months, after revealing a significant loss of customers. The owner of British Gas lost 372,000 home energy customers in the four months before November, a 3% fall since June.

 

Date Category Country Event Reuters poll Prior estimate
27/11/18 Surveys & Cyclical United States United States-Consumer confidence - Consumer Confidence 135.9 137.9
28/11/18 Surveys & Cyclical Germany Germany-GfK consumer confidence - GfK Consumer Sentiment 10.5 10.6
28/11/18 National Account United States United States-Corporate Profits Prelim - Corporate Profits Prelim 2% 2.40%
28/11/18 Consumer Sector Japan Japan-Retail Sales - Retail Sales YY 2.60% 2.20%
29/11/18 Labour Market Germany Germany-Unemployment - Unemployment Rate SA 5.10% 5.10%
29/11/18 Surveys & Cyclical Eurozone Euro Zone-Sentiment - Business Climate 0.96 1.01
29/11/18 Surveys & Cyclical Eurozone Euro Zone-Sentiment - Consumer Confid. Final -3.9 -2.7
29/11/18 Prices Japan Japan-CPI Tokyo - CPI Core Tokyo YY 1% 1%
29/11/18 Labour Market Japan Japan-Unemployment rate - Unemployment Rate 2.30% 2.30%
30/11/18 Surveys & Cyclical United Kingdom United Kingdom-GfK consumer confidence - GfK Consumer Confidence -11 -10
30/11/18 Prices United Kingdom United Kingdom-Nationwide house price - Nationwide house price yy 1.70% 1.60%
3/12/18 Surveys & Cyclical China (Mainland) China (Mainland)-PMI - Caixin Mfg PMI Final 50 50.1
Source: Thomson Reuters

 

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US-China tensions build ahead of G20 summit; May urges MPs to embrace deal

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