Equity Market Handover: Car shares lead Europe’s reversal

Wall Street, Asia-Pacific and European shares may be splitting along trade-war lines

Stock market snapshot as of [24/6/2019 3:06 PM]

  • Wall Street, Asia-Pacific and European stock markets could be splitting along trade-war lines at the start of a week that will be crucial for deciding what happens next in Washington’s dispute with Beijing
  • The absence of confrontational rhetoric over the last fortnight ahead of G-20 talks between U.S. President Trump and China’s President Xi may have enabled a higher ceiling for sentiment. Nerves remain though
  • U.S. indices opened positively. Markets from Sydney to China itself saw a similar mood
  • The acrimonious collapse of a putative U.S.-China consensus in May is being somewhat offset by expected policy accommodation. Yet with a palpable sense of realism about what the two Presidents can achieve in two days, downside could be limited, regardless of the outcome
  • The U.S. dollar’s tumble through significant technical markers (e.g., the Dollar Index’s 200-day moving average) also cushions markets that benefit from cheaper dollar financing
  • Europe is not at this party though. A conspicuous move in the opposite direction is partly down to possible U.S. tariffs on EU cars that Donald Trump has toyed with for more than a year

Corporate News

  • A painful reminder of what’s at stake came with Daimler’s third profit warning in about six months. The impact is extending the underperformance of European car shares even further
  • Car makers are pressured from many sides, including by overcapacity, costs for righting alleged emissions wrongs, electric R&D and more. Monday’s fall suggests tariff-risks on top of those woes aren’t fully priced yet
  • Daimler has traded as much as 5% lower, whilst STOXX’s Automobiles index slumps over 1%. Utilities and staples rise as befits a need for safety
  • After Brent and WTI crude oil contracts advanced between 8% and 12% in just over a week, even oil shares are adrift as the black stuff takes a rest, despite the lack of let-up in Iran-U.S. tensions
  • Treasurys join gold in rallying with U.S. shares, whilst the yen is only offside as it consolidates another percentage point gain against the dollar so far in June. The everything rally looks increasingly unsustainable
  • U.S. pharma giant Bristol-Myers Squibb, misses out for now. It slides 4% after filing for EU approval to take over biopharma Celgene for $74bn. European regulators have indicated oversight isn’t being fast-tracked. Celgene also falls 4%


Upcoming corporate highlights

BMO: before market open          AMC: after market close

Upcoming economic highlights

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.