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Jul 18, 2018

Morning Euro Markets Bulletin

 
ADVFN  Morning Euro Markets Bulletin
Daily world financial news Wednesday, 18 July 2018 11:50:25
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London open: Footsie benefits as pound bows to political uncertainty
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London stocks on Wednesday took up where they left off the previous afternoon, rising on the back of a pound that was taking a bruising from a new wave of political worries and upbeat updates from airline EasyJet and miner BHP Billiton.

The FTSE 100 jumped 39 points or 0.51% to 7,665.38 in the first hour of trading, with the pound down another 0.2% to 1.3086 against the dollar, after slumping the afternoon before as Theresa May battled to keep her government together amid various important Brexit votes in the House of Commons and the dollar was lifted by indications of continued interest rate rises from Fed chair Jerome Powell. Against the euro, the pound was up 0.1% to 1.1258.

Overnight, Brexiteers led by MP Jacob Rees-Mogg forced May to accept an amendment to her plans for a softer Brexit that commentators say will make it even more difficult for the European Union to accept her proposed customs arrangement. Confusingly the government lost to the Brexiters by winning the Commons vote 305 to 302.

"The strongly pro-EU House of Lords will probably reject the amendment," said economist Kallum Pickering at Berenebrg, suggesting the amendment may not survive a second vote.

He added that the risk has risen that a significant number of Brexit hardliners will refuse to support May in crucial votes regardless of the consequences. "This may bring down her government and lead to snap elections unless parts of the opposition were to lend May a hand and bring her semi-soft Brexit through parliament."

Prior to the vote, Tory whips had reportedly threatened rebels with a general election this summer if they defeated May's customs plans.

Labour, meanwhile, pulled five points in front of the Conservatives in the polls, with support for a second Brexit referendum also rising to its highest level. A YouGov poll for The Times put Labour up two points to 41%, with the Tories down one to 36%.

The next obstacle for sterling will be inflation figures later in the morning. The consumer price index, due from the Office for National Statistics at 0930 BST, is expected to rise in June to 2.6% year on year, from 2.4% in May.

Having been softened up by a disappointing wage growth reading a day earlier, and then dragged lower by the latest bout of Brexit uncertainty, June’s inflation data would be closely examined in relation to the Bank of England's monetary policy meeting in a fortnight, said market analyst Connor Campbell at SpreadEx.

"It’s still not completely clear what the Bank of England will do at August’s meeting, with convincing arguments both for and against a rate hike. Investors should get a bit more clarity with Wednesday’s inflation figures; forecasts suggest the CPI reading is set to bounce from 2.4% to 2.6% month-on-month, a rise that may push a few more MPC members over to the hawkish bench occupied by Andy Haldane, Michael Saunders and Ian McCafferty in June."

In company news, EasyJet's took off on the back of third-quarter revenues rising 14% to £1.6bn, as passenger numbers grew 9.3%. The budget carrier upped full-year profits guidance to £550-590m, from the previous £530-580m. British Airways owner IAG was lifted in its wake.

Miner BHP Billiton was up after revealing fourth-quarter iron ore production rose 3% and raising 2019 guidance to +3%.

Building materials group CRH gave its shares a boost as it sold off its DIY business in the Netherlands and Belgium for €510m.

Going the other way, Ladbrokes owner GVC Holdings fell despite announcing a not-unsurprising boost from the World Cup in recent weeks that helped growth accelerate in the third quarter. Helped by 11% growth in the second quarter, group net gaming revenue grew 8% in the first half.

Smiths Group also fell despite reporting a return to growth with underlying revenue for the 11 months to 30 June up 3%. All divisions were expected to be in-line with full-year expectations, except for a fall for Smiths Medical amid a suspension of some products ahead of new EU 2020 regulations.

Plastics manufacturer RPC also slumped as it revealed revenue from continuing operations for its first quarter was up 5.8%, benefitting from the contribution from Astrapak, polymer price tailwinds and organic growth of 2.0%. This is down from revenue growth of 33% last year, when organic growth was 2.8%.

Shares in water and waste company Severn Trent leaked slightly lower as it reiterated full-year guidance, with no material change to business performance or outlook.


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Top 10 FTSE 100 Risers

# NameChange PctChangeCur Price
1Easyjet Plc+2.81%+46.501,699.50
2BHP Billiton+2.52%+41.001,665.00
3Intercontinental Hotels Group+1.70%+83.004,966.00
4Croda International+1.43%+71.005,034.00
5Hargreaves Lansdown+1.42%+29.002,074.00
6Ashtead Group+1.40%+33.002,392.00
7Scottish Mortgage Investment Trust+1.37%+7.50556.00
8Barratt Developments+1.23%+6.40526.20
9AstraZeneca +1.17%+65.005,616.00
10Kingfisher Plc+1.16%+3.60312.80

Top 10 FTSE 100 Fallers

# NameChange PctChangeCur Price
1Smiths Group-7.03%-123.001,626.50
2Severn Trent-1.98%-37.501,860.00
3United Utilities-1.31%-9.40709.60
4WPP Plc-0.93%-11.001,169.00
5Centrica-0.87%-1.35154.35
6Barclays-0.73%-1.38186.98
7National Grid-0.71%-6.00839.30
8RSA Insurance-0.69%-4.40635.60
9BT Group-0.52%-1.15218.40
10Sainsbury-0.46%-1.50327.10

Daily cryptocurrency Tracker 18.7.18: Bitcoin skyrockets past $7,000

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US close: Markets reverse earlier losses to finish in the green

US stocks recovered from a poor open to finish green on Tuesday, as investors digested a disappointing quarterly update from streaming giant Netflix and a Congressional testimony from Fed chair Jerome Powell.

The Dow Jones Industrial Average finished up 0.22% at 25,119.89, the S&P 500 was ahead 0.4% at 2,809.55, and the Nasdaq 100 managed gains of 0.63% to 7,403.89.

As far Powell's testimony was concerned, the chair's semi-annual Monetary Policy Testimony broke no new ground, according to Ian Shepherdson, chief economist at Pantheon Macroeconomics.

However, Shepherdson noted that Powell's use of "for now", when stating that the Fed expects to keep raising rates "gradually", could be seen as opening the door to more dramatic action down the road if inflation rises much above the target.

"Powell has made it very clear that a modest overshoot won't trigger panic at the Fed, emphasizing again that the target is 'symmetric' and that only inflation 'persistently' above or below the target would make the FOMC 'concerned'," said Shepherdson.

Powell remained bullish on growth, specifically pointing out that the Fed realises that second-quarter GDP was "much stronger" than the first, but made no reference to the possible impact of business tax cuts on future growth or productivity.

On the data front, US industrial production increased in June, driven by a sharp rebound in manufacturing and mining output.

The Federal Reserve revealed that industrial production had risen 0.6% last month after a downwardly revised 0.5% decline in May.

With production increasing solidly, capacity utilization, a measure of how fully firms are using their resources, increased to 78.0% from 77.7% in May, just 1.8% below its 1972-to-2017 average.

Elsewhere, builder confidence in the market for new single-family homes held steady as at 68 in July, according to the National Association of Home Builders' housing market index, falling just short of economists' predictions of 69 reading.

In corporate movements, tech stocks were under pressure earlier trading after a miss from Netflix overnight, which saw the company undershoot subscriber growth by 1m users in its latest quarter.

Netflix clawed back some of its losses to finish down 5.24%, after the streaming company said late on Monday that it added 5.2m subscribers in the three months to the end of June, in line with the same period a year ago and below its own forecast for growth of 6.2m.

The group said in a statement that it had had a "strong but not stellar" second quarter.

Johnson & Johnson was up 3.54% after reporting second-quarter earnings and revenue ahead of expectations, while UnitedHealth lost 2.65% after posting a premiums miss.

CSX Corp rose 0.69% and United Continental was 0.5% higher, both companies having reported later in the day.


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Wednesday newspaper round-up: Brexit, dairy prices, Trump, Russia, Tesla, Rolls-Royce

Theresa May threatened Conservative rebels with a general election this summer if they defeated her plans on customs after Brexit. Tory whips issued the warning to Remain-backing MPs, led by the former ministers Stephen Hammond and Nicky Morgan, minutes before a crucial vote last night that would have kept Britain inside a customs union. - The Times

The European Union's financial system will come off worse in a no-deal Brexit, Mark Carney told MPs, as another chaotic day in Parliament threatened to tip Britain closer to a scenario he said would also have “big economic consequences” at home. - Telegraph

Everyday dairy products such as butter, yoghurt and cheese could become luxury items in Britain after Brexit, with price rises being caused by the slightest delay in the journey from farm to table, a report by the London School of Economics has found. - Guardian

Novichok victim Dawn Sturgess died after spraying perfume laced with the nerve agent onto both her wrists, her boyfriend, who was also exposed to the deadly substance, has revealed. Charlie Rowley, who is in a critical but stable condition in hospital, made the admission to his brother during an emotional phone conversation yesterday evening. - Daily Mail

President Trump lurched into damage control mode last night, insisting that he had “full faith” in his intelligence agencies and conceding that Russia had tried to influence the 2016 election. He also vowed to defend US democracy from future attacks but insisted that his election victory owed nothing to the Kremlin. - The Times

Scotland's shops have enjoyed their largest sales hike for more than four years thanks to the heatwave and a "bumper summer" of sport, according to figures published on Wednesday. Analysis published by the Scottish Retail Consortium and KPMG found total sales between May 27 and June 30 increased by 2.7 per cent compared to the same period last year. - Telegraph

Tesla investors have demanded an apology from CEO Elon Musk after he who rescued children in Thailand. Musk’s posts on Twitter sparked backlash from shareholders and Silicon Valley analysts, who called his behavior immature and an impediment to the car company’s success. - Guardian

Motorists face severe congestion on some routes this weekend as the summer getaway begins on ‘frantic Friday’, a motoring firm has warned. More than nine million people are expected to take to the roads on leisure trips between Friday and Sunday as school holidays begin in England and Wales, the RAC said. - Daily Mail

Changes in the accounting treatment of student loans could cost the chancellor his £15bn Brexit war chest and leave his fiscal rules in tatters. The Office for National Statistics and the European statistical authorities are reviewing the way that the government accounts for the student loan book, which is on track to hit £20 billion by 2023, amid concerns that the present convention is a “fiscal illusion” that is creating “perverse incentives”. - The Times

Goldman Sachs has confirmed that its president David Solomon will take over from its long-standing chief executive Lloyd Blankfein in October. The Wall Street banking giant announced the appointments alongside its second-quarter earnings on Tuesday. - Telegraph

The rate of pay growth for British workers has fallen to the lowest level in six months, despite record numbers of people in work across the country, official figures show. Heaping pressure on the Bank of England to delay raising interest rates from as early as August, the latest snapshot for the British labour market showed the lowest level of unemployment since the mid-1970s was yet to help workers demand higher rates of pay. - Guardian

The number of amateur landlords buying new properties continues to tumble as recent tax changes bite. According to figures from trade body UK Finance, there were 5,500 new buy-to-let home purchase mortgages completed in May, some 9.8 per cent fewer than in the same month a year earlier. - Daily Mail

Rolls-Royce could begin stockpiling key parts within months as Britain’s largest aircraft engine maker braces for a disorderly Brexit. The company is preparing to take “costly” and “inconvenient” steps to shore up inventories of components by the end of the year, having grown frustrated with the pace of the negotiations with Brussels. - The Times

Premier Foods boss Gavin Darby failed to act on investment bank advice to sell the company’s Bachelors brand, it has emerged. The chief executive rejected the recommendation from the soup maker’s long-standing broker Credit Suisse, sparking a dispute with shareholders that has led to a bid to oust him tomorrow at its annual general meeting. - Telegraph

Netflix’s surprise failure to hit its subscriber targets stripped $30bn (£23bn) from its stock market value as investors and analysts expressed fears that the stellar global growth of the streaming service may have peaked. On Monday night, the company reported it had in both the US and, most crucially, in the international markets it is now relying on for the vast majority of future growth. - Guardian

The US dollar is overvalued against most of the world's currencies, including the pound and euro, according to the latest Big Mac index from The Economist. As global trade tensions escalate, the long-running light-hearted index based on the popular McDonald's burger shows the dollar is 30 percent overvalued against the pound and 16 per cent against the euro. - Daily Mail

 

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