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Trump Tariff 2.0 - EMEA brief 19th June


JamesIG

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  • Asian stocks slide on further trade war tariffs.
  • Yen, treasuries and gold gain as traditional safe havens.
  • UK incomes for those in employment rise at the highest rate since the financial crisis according to IHS Markit yesterday.
  • CYBG confirmed yesterday it had agreed a £1.7bn tie up with Virgin Money.
  • Oil prices whiplash, but ultimately fall on expectations that OPEC and Russia will gradually increase output after withholding supply since 2017.
  • Payment company Square has been awarded a BitLicence to operate in New York. BTC trades at $6700, and ETH at $515

Asian Overnight: Weakness in overnight markets came as no surprise after Donald Trump declared another $200 billion worth of goods that would be hit by a 10% tariff after China imposed a like for like $50 billion package of US goods to be targeted. This trade war is set to kick in on July 6, and instead of making progress towards a solution, it looks as if relations between the two biggest economies in the world are instead deteriorating. Meanwhile, crude prices rallied ahead of Fridays OPEC meeting, with rumours that a production hike will be smaller than expected.

UK, US and Europe: Looking ahead, the current themes impacting markets are likely to remain in focus, with few major economic events of note. Appearances from ECB economist Praet, and Fed member Bullard will provide a central bank focus. Meanwhile, the US session sees a focus on construction with the release of building permits and housing starts data.

South Africa: The local bourseis expected to open up significantly lower this morning following on from soft US Futures and a rampant decline in China (-3.45%) and Hong Kong (-2.76%). Emerging markets are bearing the brunt of the weakness today from the 'Trump Tariffs', as reflected in their respective currency declines. The rand looks to be fast approaching the R14/$ mark. Tencent Holdings is trading 3.17% lower on the Hang Seng, suggestive of a similar move in major holding company Naspers. BHP Billiton is trading 1.2% lower in Australia , which combined with weaker base metal prices is suggestive of an initial decline in local diversified miners. 

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

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Source: Daily FX Economic Calendar

Featured video: 'Be wary’ of Carney’s guidance

Corporate News, Upgrades and Downgrades

  • Ashtead said that underlying pre-tax profit was 21% higher at £927.3 million for the full year, and revenues were up 21% at £3.42 billion. The dividend was boosted 20% to 33p. 
  • McCarthy & Stone has issued a profit warning, downgrading its forecasts and announcing the departure of the CEO. Legal completions are forecast to be in the 2100-2300 range, compared to 2302 year-on-year. 
  • Debenhams has issued another profit warning, saying that full-year pre-tax profit will now be £35-40 million, versus consensus forecasts of £50.3 million. 

Beiersdorf upgraded to neutral at JPMorgan
Ferrexpo upgraded to buy at HSBC
Verbund upgraded to reduce at AlphaValue
JP Morgan maintain overweight rating on Naspers (SA) with a target price of 450000c

Edenred downgraded to neutral at MainFirst
Galp downgraded to sector perform at RBC
Hornbach Baumarkt cut to reduce at Commerzbank
Informa downgraded to hold at Peel Hunt

Please note: This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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