Financial market research and analysis

European shares have opened lower on Thursday after a weak session in Asia with US futures pointing to soft start on Wall Street. The US dollar is a little softer this morning after a positive response to Fed minutes. Oil prices are stable following the big jump off $60 per barrel in Brent crude futures yesterday.

HK tensions: Equities pullback continues

The export-sensitive DAX index is feeling the brunt of the declines this morning. Expectations of a phase one trade deal are growing dimmer by the day. Comments from the Chinese have played to both sides of the case for a phase one trade war being done, but traders have a glass half-empty attitude for now. On the one hand Chinese Premier Li sounded upbeat about the prospects of a deal but a strong warning from Chinese officials directed at Donald Trump not to sign off on US legalisation to support Hong Kong protests risks talks falling apart altogether.

GBP: Labour Manifesto

British corporate executives will be sweating before the release of Labour’s ‘radical and ambitious’ manifesto today. The FTSE 100 standing at its biggest discount to European indices in a decade tells you  investors have been sweating about both Brexit and a Labour government for a while. Talk of an extra tax on oil companies, presumably under the guise of environmentalism adds to the concern already percolating through boardrooms. From a markets perspective, we think the manifesto will see a delayed reaction. The more extreme the Labour manifesto, the more volatility we’d expect to see in the pound and UK shares when the polls tighten closer to election day. Clearly the policies don't matter if Labour is not in government. A reduced working week and the nationalisation of utilities and telecom companies may be impractical, but they are eye-catching for voters. We still favour a break above 1.30 in Sterling but stand ready to reverse that call if Labour’s manifesto can capture the public’s imagination.

Royal Mail shares go postal

Royal Mail shares went postal on Thursday, falling double digits as investors reacted to half-year results. Higher parcel volumes helped Royal Mail ‘post’ a profit but that hasn’t satisfied disgruntled shareholders.  A comment from the privatised national mail group that its turnaround plan is behind schedule has been the centre of the concern. There are now several huge overhangs to Royal Mail as an investment proposition. Those include falling letter volumes, unions ready to strike over Christmas, international expansion behind schedule and the prospect of nationalisation under a Labour government. Disappointing results should embolden Corbyn’s Labour Party over nationalisation. The Royal Mail shares have now lost a quarter of their value this year alone. The size of the declines can in part be explained by positioning. Traders who had positioned for a break out of a 6-month consolidation above 230p are now covering those trades en-masse.

US opening calls

S&P 500 to open 5 points lower at 3,103

Dow Jones to open 51 points lower at 27,770