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Chinese manufacturing rebound, Trade deal stalled & Ted Baker

European shares opened higher on Monday with LCG prices pointing to a higher open on Wall Street. The dollar and the British pound are slightly firmer. Gold is softer and oil is off the lows of Friday’s big sell-off.

Surprise pickup in Chinese & European manufacturing

The PMI data out today supports the idea that the global growth slowdown is bottoming out. In China the Caixin manufacturing PMI saw a surprise pickup with the fast acceleration in 3 years. In Spain, the manufacturing PMI rose one full point above expectations but is still in contraction.

Investors are taking any signs of an end to the economic gloom, especially in China, as a reason to buy shares that benefit from stronger growth. Not many economists expect this data to signal the start of a V-shape recovery. The idea for now is that the economic performance needs to level out before it has any chance to recover meaningfully in 2020.

Trade Deal stalled (but still on)

Equities and oil prices are up on Monday in a sign of cautious optimism about the next steps toward a phase one trade deal. Reports on Sunday suggested the trade talks have stalled because of the disquiet in China about the Hong Kong legislation passed into law by President Donald Trump. China have reacted to the US bill on Hong Kong with some countermeasures of their own, including delaying a decision on US warships stopping in Hong Kong. Trade talks stalling is not good but its better than ending. As is often the case, traders are seeing bad news in a positive light, simply because its better than what might have been. An end to the trade talks could easily press the repeat button on last Decembers sharp equity sell-off. As it turns out, the Hong Kong bill was a good test of China’s convictions.

Ted Baker overstated stock, m&a potential ?

Shares of Ted Baker are out of fashion today. The fashion retailer has said it may have overstated the value of its inventories. The good news is that Ted Baker announced this rather than it being leaked, though its not clear how long the company has been sitting on it. The bad news is that with these kinds of negative surprises, there is both the hit to the bottom line and the loss of confidence in management. At a time when sales and earnings are through the floor and the CEO had to quit for misconduct, anything that further dents confidence in management is going to see a particularly strong reaction. Hence the double-digit share price decline today.

If there is any silver lining, we think it comes in the form of acquisition potential. Ted Baker shares have now lost three quarters of their value this year and consolidation is already happening in the luxury sector as evidence by the LVMH purchase of Tiffany. A household name is now up for grabs at bargain basement levels.

24-1-2020

Markets cheery and central bankers dreary…
EQUITIES Shares in Europe look set for a strong start to trading on Friday morning. The World Health Organisation not designating the Wuhan coronavirus an international emergency has taken the fear gauge down a few notches. The travel restrictions and cutback… Read more

23-1-2020

Risk aversion back on coronavirus & US-EU Trade. ECB up next
EQUITIES Risk aversion has taken hold across Asian markets with the sad and worrying news of more deaths due to the coronavirus in China. Official reports now indicate nearly 600 cases and Macau has cancelled Lunar New Year celebrations after a second case of… Read more

22-1-2020

DAX record high, Tesla $100B & markets brush off pandemic
EQUITIES Blowout fourth quarter earnings and subscriber growth at Netflix has refocused investors’ attention on market fundamentals. Market sentiment had been impaired by worries about the new coronavirus out of China, which has now spread to the United State… Read more

20-1-2020

Oil prices spike on Libya pipeline closure, Europe to open higher
EQUITIES European shares are set to open higher on Monday in what may be a more muted day of trading with Wall Street closed for Martin Luther King Jr. Day. Trading in Asia was light with US investors on holiday today and Chinese New Year celebrations set to b… Read more

17-1-2020

S&P 500 tops 3,300 as Alphabet reaches $1 trillion
EQUITIES European shares look set to open higher on Friday bolstered by stats showing stable economic growth in China and another record-breaking session on Wall Street that saw the S&P500 top 3,300 for the first time. Mining companies are likely to featur… Read more

16-1-2020

Europe to open higher & Sterling recovers
Shares in Europe and on Wall Street are set for a higher open on Thursday after a positive session in Asia.   Wall Street notched up new records and finished the day higher after the signing of the phase one US China trade deal. That the S&P 500 and Nasdaq… Read more

15-1-2020

Stocks, oil lower as Tariffs stay in place, Persimmon, Goldman Sachs, Saunders, UK CPI
European shares are lower on Wednesday after a down session in Asia while LCG pricing points to a lower start on Wall Street. US Treasury Secretary Steve Mnuchin confirmed that tariffs against China will remain until November, after the US election. The tariff… Read more

14-1-2020

Currency manipulator, China exports, Yuan 5-month high, US bank earnings
European shares are flat on Monday after a mixed session in Asia while LCG pricing points to a lower start on Wall Street. INDICES: US removes China currency manipulator status Wall Street has yet again reached new record highs in the lead-up to the signing… Read more