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Europe higher before US jobs. New BP journey under Bernie

UK & European markets have opened higher on Friday. We are taking heart from the higher close on Wall Street and putting the whipsaw action that got us there to one side. Opening gains are being tempered by caution ahead of a key monthly US jobs report.

Services dragged into the slowdown

We can reflect on yesterday’s dramatic price action in equities to understand the market’s logic going into this month’s NFP (jobs) report. US shares fell in reaction to service sector data that missed expectations but subsequently rebounded on renewed hopes for an October rate cut. Naturally the US dollar dropped and has added to the losses for the same reasons, now down for a fourth day running. The ECB has shown its hand via its QE announcement so moves in the forex market are very much dollar-orientated at the moment.

US jobs report coming up

Little can be gleaned from US futures which indicate a flat open. If jobs numbers meet or beat expectations, it will be welcome news for the US economy but will undermine the case for more aggressive easing from the Fed. The Fed are clearly worried about Trump’s trade war, and the decade low in US manufacturing activity this month supports this view. But we think they only start to react with loser policy when the US consumer is affected, and that will start when unemployment rises. Federal Reserve Vice Chairman Richard Clarida, for his part said yesterday that the consumer is “in good shape”. We think poor US economic data poses downside risk to stocks and the dollar while the Fed maintains the current modest stance on easing policy.

Brexit – response to Boris' plan

Neutral observers seem to have been mostly positive about the kind of compromises presented by Boris Johnson. With more detail, Boris’ deal could be workable. Unfortunately it’s not the neutrals that will make or break a UK-EU Brexit deal. MPs are now so bitterly divided that we are of the view, this parliament will never vote through any deal offered up by Boris Johnson. The EU understands the dynamics in the British parliament and we think, are just paying lip-service to negotiations. Sterling has softened alongside the political uncertainty in the past week, but bigger-picture, we think traders will position for another extension, which favours Sterling-strength pre-October 31.

BP’s Bob Dudley to step down

Upstream business head Bernard Looney will succeed Dudley as CEO when he retires in 2020. The logic seems to be that Dudley has steered the ship well through troubled waters so an insider and one of his team is best suited to take the helm. It’s a new man for new challenges. With Deepwater Horizon in the rear-view mirror, a new era of US shale output and the increasing focus on green energy and the environment, shareholders should feel comforted that succession planning is complete.

22-10-2019

Is Brexit happening? The ball is in Parliament’s court. P&G to top estimates.
Stock markets trade on a positive note on growing expectations that the US and China may finally clinch a partial deal at next month’s APEC meeting in Chile. US President Donald Trump said that China is already buying US farm products, and he wants them to buy… Read more

21-10-2019

Pound slips as UK leaves BoJo’s deal aside and votes to delay Brexit
The pound fell to 1.2875 against the US dollar, as British lawmakers voted to ask for a delay on the Brexit deadline on Saturday rather than voting on the Brexit deal that Boris Johnson put on the table.As a result, a letter was sent to EU’s Donald Tusk asking… Read more

18-10-2019

China slows. Pound gains as Parliament prepares to vote on Johnson’s deal
The Chinese GDP growth fell to 6% in the third quarter of 2019, although the industrial production jumped to 5.8% y-o-y in September and the retail sales advanced 7.8% as expected, versus 7.5% printed a month earlier. Fixed assets excluding the rural area expa… Read more

17-10-2019

Pound traders hedging downside risks, again. PM’s alternative businesses at jeopardy.
If the week started on some optimism regarding the US-China trade deal and the Brexit, it will probably end on battered hopes of seeing any progress on both ends.The S&P500 (-0.20%), the Dow Jones (-0.08%) and Nasdaq (-0.30%) closed Thursday’s session in t… Read more

16-10-2019

US-China deal hopes are being dashed, again. Netflix in focus.
US stock markets closed in the green on better-than-expected bank earnings on Tuesday.But the US stock futures headed south in the overnight trading session, as tensions with China started rising again amid the US House passed a bill on Hong Kong, which requir… Read more

16-10-2019

US bill risks China retaliation
Shares in Europe slipped, and US futures are pointing lower on Wednesday. There’s some fear out there that China will retaliate to a US bill defending the rights of Hong Kong protestors. The timing is certainly awkward, just as the US and China struck a “phase… Read more

15-10-2019

China wants more talks. Euro gains ahead of a potentially ugly ZEW survey.
Chinese officials threw cold water on the optimism about Donald Trump’s first phase trade agreement, as they said to be willing to discuss more before signing a deal. We could already feel that the Chinese were not fully satisfied with their Washington visit, … Read more

14-10-2019

Equities edge moderately higher, no feeling of euphoria after US-China partial agreement
Equities began the week on a positive note amid the US and Chinese officials reached a partial trade agreement at last week’s negotiations.The S&P500 (+1.09%), the Dow Jones (+1.21%) and Nasdaq (+1.34%) gained on Friday, although Donald Trump’s announcemen… Read more