US-China trade detente a-brewin’

Calls for a positive open come in spite of an across-the-board sell-off on Wall St and on Asian bourses, where concerns lingered over a slowdown in China’s economy.

US-China trade detente a-brewin’

FTSE 100 Index called to open +23pts at 7520, rebounding after Wednesday’s sell-off that revisited the index’s June lows. Bulls need a break above 7555 to attempt to recover some of yesterday’s losses. Bears require a breach 7491 overnight lows to once again challenge June’s 7485 low. Watch levels: Bullish 7560, Bearish 7476

Calls for a positive open come in spite of an across-the-board sell-off on Wall St and on Asian bourses, where concerns lingered over a slowdown in China’s economy (Fixed Asset Investment growth at record lows) and the ongoing Turkish tinderbox. Emerging market currencies got some reprieve after news that Qatar was investing $15bn to prop up Turkish lira.

Much of the positive mood coming into the European trading session could be attributed to news of a potential detente in US-China trade relations, asChina is sending a high-level trade delegation to the US, led by Vice Minister of Commerce Wang Shouwen, to discuss the ongoing global tariff confrontation.

USD retreated from 13-month highs as risk aversion wanes, supporting the USD-priced metals & oil prices and, in turn, helping the FTSE’s heavyweight energy & Mining sectors. Oil prices are off overnight lows on the back of a weaker USD, after suffering steep losses yesterday. Copper is likewise rebounding, but lingering worries over the Chinese economy could yet put a strain on some of the FTSE Miners (dual-listed BHP Billiton and Rio Tinto are down 1.5-2% in Australia overnight).

In corporate news, this morning Takeover Panel confirms that Disney must make the £14/share offer for Sky if it buys 21st Century Fox. A mandatory offer will not apply if either Fox buys 100% of Sky or if another party buys more than 50% of Sky by the time Disney/Fox deal is finalised. This confirms the original regulator ruling.

Kingfisher Q2 like-for-like group sales +1.6% in Q2 vs -0.4% fall in Q1, helped by weather-related categories, UK & Ireland sales +4.2% YoY (B&Q +3.6%, Screwfix +5.5%), but French sales at Castorama -3.8% on weaker footfall. H1 group gross margin -40bp (Q2 ahead of Q1), but expects to grow FY group gross margin after clearance costs.

KAZ Minerals H1 gross revenue +31%, op. profit +59%, pre-tax profit +48%, copper production +18% to 140kt. FY copper production guidance reiterated at 270-300kt, cost guidance maintained, copper market outlook positive on the back of strong demand and declining supply from existing mines. Marshalls H1 revenue +12% YoY, EBITDA +13%, pre-tax profit +12%, interim dividend +18%, op. margin +10bps, June-July trading very strong at +21%, but the UK market is forecasted to contract by 0.6% in 2018 followed by growth in 2019.

Rank Group H1 like-for-like group revenue -2.3% YoY, group EBITDA (before exceptionals) -6.8%, adj. pre-tax profit -6.3%, dividend +2.1%. New leadership will focus on op. improvements. Bank of Georgia H1 group profit +11.2% YoY, total assets +0.6%, banking business revenue +14.8%, net interest margin -40bp.

In focus today will be UK Retail Sales (9:30am) figures for July. The World Cup spending bonanza is expected to have helped UK retailers, with turnover growth accelerating to 3% YoY (from 2.8% growth in June), though some of the increased spendings can be attributed to rising energy costs (ex-Fuel Retail Sales are expected to slow).

US housing market is showing signs of resilience, with both Housing Starts and Building Permits (1:30pm) forecast higher in July. Manufacturing, however, looks to be slowing down, with Philly Fed Index (1:30pm) projected lower in August at 22.0 (against 25.7 in July).

US retail giant Wal-Mart is reporting quarterly earnings today, joined by PC hardware manufacturer NVIDIA and retailer JC Penney.

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