Sentiment improves on US Sino trade talk optimism

The FTSE climbed northwards in early trade, led higher by the miners on increased optimism surrounding trade talks between the US and China, which are due to start this week. Investors will be watching these bilateral trade talks closely as the two powers try to find some common ground in their escalating trade war, which is set to see more tariffs imposed on China as soon as Wednesday.

Miners, which are sensitive to demand from China, the biggest metal consumer in the world, dominated the upper reaches on the FTSE, as the pending US -Sino trade talks are giving markets optimism that a de-escalation of trade tensions is possible.

However, there is a chance that the markets are getting ahead of themselves here given the gapping differences between the US and China on fundamental issues such as technology transfer, subsidies and local market protectionism which are a standard component of the Chinese economy. This is not just a case of China needing to open the doors just a little further, we have already seen that the White House is looking for China to make significant steps to opening its economy in order for the trade tariffs to be put on hold.  

Sage plummets over 6%

Sage Group dived to the bottom of the FTSE, shedding over 6.6% across the course of the session following a downgrade from Deutsche Bank to a sell rating. Analysts at Deutsche Bank are just the latest of a string of analyst’s who have turned negative on the stock, owing to increased competition and intensifying concerns over its ability to push organic growth above its current 6% level, towards its target of 7%; a target which was downgraded from 8% at the start of the year. Sage shares are now down 22% year to date.

House builders lower as houses price decline

House builders were on the backfoot on Monday after Rightmove House price survey showed that average process decreased 2.3% from July to August, with London seeing the biggest declines. Whilst house prices typically dip at this time of year, August’s fall was sizeable as tougher lending conditions and Brexit uncertainties also impact on the national housing market. Persimmon was down 1.3% on Monday following the house price data and ahead of it reporting later this week.

Investors will be particularly interested to see whether the BoE’s interest rate rise in early August is starting to impact on the firm’s ability to sell homes. The latest update from Persimmon, in July, was reassuring given the less than favourable backdrop. Whilst revenues are expected to have increased by 5% to £1.84 billion, profits margins will be under the spotlight as the firm has previously indicated that it expected an improvement in underlying margin in the first half of the year.