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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.

21-9-2020

Trump approves TikTok deal, Powell & Superdry earnings
MARKETS The Dow Jones fell on Friday as investors had to contend with another selloff in big tech, led by Google. Friday moves came as four major types of options contracts were set to expire in a quadruple witching, triggering a rise in volatility. European e… Read more

18-9-2020

USD/JPY sub-105 and UK retail sales
MARKETS US stocks fell in volatile trading on Thursday amid renewed pressure in shares of major tech companies. Conflicting messaging on the coronavirus vaccine front and uncertainty around further stimulus also weighed on sentiment. European equities fell aro… Read more

16-9-2020

Buffett-backed Snowflake IPO & Fed Preview
MARKETS The Dow Jones ended roughly flat on Tuesday, pressured by a fall in financials and a u-turn in Apple after the tech giant launched a new services bundle and hardware. The S&P 500 was up 0.52% while the Nasdaq added 1.21%. Apple rose 0.2% but had be… Read more

14-9-2020

Brexit bill first debate & tech stock sell-off
Markets The major U.S stock indexes fell for the second week in a row, as technology stocks experienced their worst pullback since March. The market was volatile in a holiday-shortened week, with the Nasdaq posting a 4% decline on Tuesday followed by a nearly… Read more

18-5-2020

Gold hits 7-year high after Powell Warning
Fed Chair Jay Powell has warned the US economic recovery might last through the end of 2021. The Fed is normally too optimistic in its forecasts so the outlook feels bleak. Still, warm weather is encouraging countries to continue exiting lockdown. If the flu s… Read more

14-5-2020

Powell predicts more pain to come but no NIRP
A warning from the top of the US central bank that there’s more pain to come isn’t going down well across markets. Fed Chair Jerome Powell warned yesterday that more stimulus will likely be needed in the US to fend off the economic damage done by virus and pol… Read more

13-5-2020

“Suffering and death” warning hurts markets
A sense of caution has taken hold across markets. Shares, riskier currencies and oil are pointed lower. There’s a reassessment of the likely timeline for economic reopening. Our sense is markets juiced up by higher liquidity may have gotten ahead of themselves… Read more

12-5-2020

Bitcoin halving, dollar breakout on second wave fears
Market sentiment remains fragile. There’s a lot of emphasis being placed on the virus numbers in economies that have been gradually reopening.  Wuhan, the City in China where it all began reported its first ‘cluster’ of new cases yesterday after lifting restri… Read more