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Aug 7, 2019

Europe | Europe Markets Closing Report: European stocks close higher as trade concerns linger, bond yields slide

Chloe Taylor, Elliot Smith

European stocks closed in positive territory on Wednesday despite tumbling bond yields stoking concerns about a global economic slowdown.

European Markets: FTSE, GDAXI, FCHI, IBEX

FTSEFTSE 100FTSE7195.3723.680.33734555777
The pan-European Stoxx 600 was 0.2% higher at the closing bell, with most sectors and all major bourses in positive territory. Travel and leisure stocks led the gains, while oil and gas stocks tumbled after oil prices plummeted.
German bond yields hit record lows on Wednesday, while U.S. Treasury yields plunged as investors moved back into safe haven assets following more rate cuts from central banks in New Zealand, Thailand and India.
Brent crude oil lost 4.2% by the closing bell Wednesday, trading at $56.45 a barrel, as concerns about the intensifying Sino-U.S. trade war fueled concerns about energy demand and the global economy. U.S. West Texas Intermediate Crude was around 5% lower.
Markets in the United States opened the session steeply lower but had pared some losses by the late morning. At one stage, the Dow Jones Industrial Average had shed almost 600 points.
Investor focus is also still largely attuned the Chinese yuan, after China’s central bank set its currency slightly weaker than expected amid an ongoing escalation of its tit-for-tat with the U.S. The People’s Bank of China set the official midpoint reference for the yuan at 6.9996 on Wednesday, slightly weaker than expected, two days after Washington labeled Beijing a currency manipulator.

Bank earnings

Back in Europe, the banking sector was in focus as the European banking index hit a one-year low following a slew of new financial results. Commerzbank posted a net second-quarter profit of 271 million euros ($303.79 million) which was little changed from the same period a year ago, but exceeded the 217 million euros expected by analysts. The German lender’s shares slid 6.4%.
Italy’s Unicredit posted a sharp rise in second-quarter net profit of 1.85 billion euros, an increase from the 1.02 billion euros posted a year ago, boosted by the sale of its stake in FinecoBank, but coming in below analyst expectations. The bank’s stock was down 5% by the end of the session.
Shares of ABN Amro were 0.3% higher at the closing bell, paring earlier losses after the Dutch bank topped estimates with a modest 1% rise in second-quarter net profit to 693 million euros, up from 688 million a year prior. However, the lender said it had incurred extra costs in anti-money laundering efforts.
British investment giant Standard Life Aberdeen also saw its shares slide 7.5% to the bottom of the Stoxx 600 after adjusted pre-tax profit fell in the first half of the year, while assets under management rose 5% despite an exit of clients from higher-margin fund products.
Elsewhere, food delivery service Just Eat’s shares ended the session at the top of the index. Earlier this week the company announced it had agreed terms to be taken over by Dutch rival, in a deal worth £5 billion ($6 billion).
Swiss workspace provider IWG also surged upward, its shares gaining 6% after announcing a substantial share buyback scheme on Tuesday. German pharmaceutical giant Bayer climbed toward the top of the European benchmark, gaining 6% after it announced the sale of Currenta, its joint venture with domestic peer Lanxess.
Economic data was also in focus after figures released Wednesday revealed German industrial output fell at a far steeper pace than expected in June, fueling fears that Europe’s biggest economy could be heading for recession. Industrial output fell by 1.5% on the month, far exceeding the forecast 0.4% decline, figures from the Statistics Office showed.

Dow | Before The Bell Update: Stock futures losses accelerate, Dow now set to open 160 points lower

Fred Imbert, Sam Meredith

U.S. stock index futures dropped on Wednesday as the ongoing trade war sparked fears of a global economic slowdown and drove investors away from riskier assets and into traditional safe havens like bonds and gold.  
At around 8:10 a.m. ET, Dow Jones Industrial Average futures indicated a drop of 160 points. S&P 500 and Nasdaq 100 futures also pointed to a drop at the open. Futures were trading higher earlier on Wednesday morning. 
The drop in stock futures came as Treasury yields fell to their lowest level since 2016 while gold reached a more than six-year high. The benchmark 10-year Treasury yield traded at 1.63% after staring August above 2%. The spread between the 10-year rate and the 2-year yield fell to its lowest level since 2007.
Gold futures broke above $1,500 per ounce for the first time since April 2013. The metal’s returns are now higher than the S&P 500′s for the year. 
Tensions between China and the U.S. have been rising since last week, when President Donald Trump announced a 10% tariff on an additional $300 billion worth of Chinese goods. On Monday, China let its currency fall to its lowest level in more than a decade against the U.S. dollar, with the yuan breaking below 7 per U.S. dollar and triggering the worst sell-off of the year on Wall Street. China insists, however, the move was not in response to the newly announced tariff. 
“This looks more like a warning shot than active devaluation, with the yuan’s fall a reflection of worsening economic fundamentals and rising trade tariff risks,” said Mark Haefele, global chief investment officer at UBS GWM. “For policymakers in China, arbitrarily defending the 7.0 mark amid these pressures represents a moral hazard, and one which only worsens the longer it is left to build up.”
The trade war between China and the U.S. has been going on for more than a year. Investors have been worried about its ramifications in terms of global growth and corporate profits. Some central banks have even started cutting interest rates amid these pressures. 
Overnight, New Zealand, India and Thailand all cut interest rates. The Federal Reserve had cut rates last week by 25 basis points.
In corporate news, Disney shares slid on weaker-than-expected results for the previous quarter. Disney’s results were weighed down by increasing losses in streaming services such as Hulu, ESPN+ and  Disney+. The media giant also blamed the integration of Fox’s entertainment assets for the weak numbers. Disney shares traded down more than 3% in the premarket. 
—Reuters contributed to this report.

Market Insider | Stocks making the biggest moves premarket: CVS, Office Depot, Wendy's, Cambrex, Hertz & more

Peter Schacknow

Check out the companies making headlines before the bell:
CVS Health – CVS reported adjusted quarterly profit of $1.89 per share, 20 cents a share above estimates. Revenue also came in above forecasts, as same-store sales rose 4.2%. CVS also raised its full-year guidance, as it continues to benefit from its acquisition of insurer Aetna, as well as increasing sales of prescription drugs.
Capri Holdings – The company formerly known as Michael Kors reported adjusted quarterly profit of 95 cents per share, 5 cents a share above estimates. Revenue was slightly below forecasts, however, and Capri cut its full-year outlook on weaker-than-expected demand for Michael Kors-branded products.
CyberArk Software – The cybersecurity firm earned an adjusted 59 cents per share for its latest quarter, 12 cents a share above estimates. Revenue was also above analysts’ projections, benefiting from growth in its customer base. The company also raised its full-year forecast.
Office Depot – The office products retailer beat estimates by 2 cents a share, with adjusted quarterly profit of 7 cents per share. Revenue matched Street forecasts, helped by stronger performance in its business-to-business operations.
Teva Pharmaceutical – The drugmaker came in 3 cents a share above estimates, with adjusted quarterly profit of 60 cents per share. Revenue above topped estimates. Separately, the company announced the departure of CFO Michael McClellan due to personal reasons.
Wendy’s – The restaurant chain beat forecasts by a penny a share, with adjusted quarterly earnings of 18 cents per share. Revenue missed forecasts. A North American same-store sales increase of 1.4% was slightly above consensus forecasts.
Cambrex – The drug developer agreed to be acquired by an affiliate of Permira funds for $60 per share in cash, 47% above Tuesday’s closing price. The deal is valued at $2.4 billion, including assumed debt.
Lumber Liquidators – The flooring maker matched estimates with adjusted quarterly profit of 7 cents per share. Revenue missed forecasts, however, and the company also cut its full-year sales forecast as its sees software customer traffic.
Walt Disney – Disney missed consensus estimates by 40 cents a share, with adjusted quarterly profit of $1.35 per share. Revenue also fell short of forecasts. Disney said the integration of the $70 billion in assets acquired from the former 21st Century Fox was responsible for the miss.
Wynn Resorts – Wynn matched forecasts with adjusted quarterly earnings of $1.44 per share, with the casino operator’s revenue slightly above analysts’ estimates. The company said strength in Macau and upbeat hotel revenue in Las Vegas helped drive results.
Weight Watchers – Weight Watchers came in 14 cents a share above consensus forecasts, with quarterly earnings of 78 cents per share. The weight loss company’s revenue missed forecasts. Weight Watchers also raised its full-year forecast as it sees upbeat member recruitment trends.
Match Group – Match reported better-than-expected results for its second quarter, with the dating service operator also raising its full-year forecast. Match’s performance was helped in part by strong subscriber growth at its Tinder service.
Walgreens Boots Alliance – Walgreens said it planned to close about 200 U.S. stores in a move it says will deliver annual cost savings of more than $1.5 billion by 2022.
Twitter – Twitter said it may have used data for personalized ads without account holder permission. It discovered and fixed the issue earlier this week, although it has not yet determined who may have been affected.
Papa John’s – Papa John’s reported adjusted quarterly profit of 28 cents per share, 2 cents a share shy of Street forecasts. The pizza chain’s revenue came in above estimates. Papa John’s is also forecasting a loss of 10 cents to 40 cents per share for 2019, compared to prior estimates of breakeven to a 50 cents per share profit.
Hertz – Hertz reported adjusted quarterly profit of 74 cents per share, well above the consensus estimate of 37 cents per share. The car rental company’s revenue came in above Wall Street forecasts, rising to a record high. Hertz said its bottom line was helped by productivity improvements.

World News: Taliban claim bomb attack on police in Afghanistan; nearly 100 wounded

Reuters Editorial

KABUL (Reuters) - A suicide attacker detonated a car-bomb outside a police station in the Afghan capital Kabul on Wednesday wounding at least 95 people, government officials said, and the Taliban claimed responsibility.
People walk in front of a building with broken windows at the site of a car bomb blast in Kabul, Afghanistan, August 7, 2019. REUTERS/Omar Sobhani
There has been no let-up in violence in Afghanistan even though the Taliban and the United States appear close to a historic pact for U.S. troops to withdraw in exchange for a Taliban promise the country would not be used as a base from which to plot attacks by extremists.
The blast, in the west of the city during the morning rush hour, sent a huge cloud of gray smoke billowing into the sky.
The Taliban said a “recruitment center” had been attacked by one of their suicide bombers.
“A large number of soldiers and police were killed or wounded,” the Taliban said in a statement.
Government security officials said they were searching the scene and expected to update casualty details later.
The bomb went off when a vehicle was stopped at a checkpoint outside the police station, said interior ministry spokesman Nasrat Rahimi.
A health ministry spokesman said 95 wounded people had been taken to hospitals. Most of them were civilians, including women and children, he said.
“Again a Taliban suicide attack in Kabul targets a civilian area that resulted in harming of so many innocents,” Sediq Sediqqi, a spokesman for President Ashraf Ghani, said on Twitter.
The blast came a day after the Taliban called for a boycott of a Sept. 28 presidential election and threatened to attack election rallies.
Separately, security forces conducted raids on two Islamic State militant hideouts in Kabul overnight and killed two militants and seized a large quantity of explosives and bomb-making equipment, the National Directorate of Security (NDS) said.
Three members of the security forces were also killed, an agency spokesman said.
Both the U.S. peace envoy leading talks with the Taliban, and the Taliban reported significant progress this week in their talks in Qatar aimed at ending America’s longest war.
The militants control more territory than at any point since the United States bombed them out of power in 2001 and many government officials fear their war with the Taliban will not end if U.S. troops leave.
About 20,000 foreign troops, most of them American, are in Afghanistan as part of a U.S.-led NATO mission to train, assist and advise Afghan forces. Some U.S. forces carry out counter-terrorism operations.
President Donald Trump has announced his aim to end the war.
Reporting by Orooj Hakimi, Abdul Qadir Sediqi; Writing by Robert Birsel; Editing by Paul Tait and Michael Perry

Dow I Before The Bell: Dow futures cautiously edge higher amid trade war jitters

Sam Meredith

U.S. stock index futures were slightly higher Wednesday morning, amid simmering trade tensions between the world’s two largest economies.
At around 6:10 a.m. ET, Dow futures indicated a positive open of more than 45 points. Futures on the S&P and Nasdaq were slightly higher.
Signs that China is stepping in to steady the yuan appeared to help soothe investor concerns of a global currency war on Wednesday. It comes after a period of heavy selling pressure at the start of the week.
The People’s Bank of China (PBOC) set the official midpoint reference for yuan at 6.9996 on Wednesday, just a hair away from the psychologically important 7-per-dollar level. The latest yuan fixing was slightly weaker-than-expected, keeping markets nervous about its intentions.
Beijing let the yuan breach that 7-per-dollar level for the first time in 11 years on Monday, shortly after President Donald Trump threatened to impose more tariffs.
On Tuesday, the PBOC warned the U.S. that designating it as a currency manipulator would have severe consequences for the global financial order.
On the U.S. data front, weekly mortgage applications are expected at 7 a.m. ET, while consumer credit figures for June will be released at 3 p.m.
In corporate news, CenterPoint, NRG Energy, and Teva Pharma are among some of the major companies set to report their latest quarterly earnings before the opening bell.
Booking Holdings, Fox Corp, and AIG are scheduled to report their latest figures after market close.
—Reuters contributed to this report.

Asia I Asia Shares closing Report: Asia shares mixed as China sets the yuan midpoint slightly weaker than expected

Eustance Huang

Asia Pacific stocks traded mixed on Wednesday as investors kept a close watch on the Chinese yuan amid an escalating trade dispute between the U.S. and China.
The People’s Bank of China (PBOC) set the the official midpoint reference for the yuan at 6.9996 per dollar, which was slightly weaker than market expectations. China’s central bank allows the exchange rate to rise or fall 2% from that number.
Mainland Chinese shares declined on the day: The Shanghai composite shed 0.32% to about 2,768.68, the Shenzhen component fell 0.5% to 8,814.74 and the Shenzhen composite fell 0.427% to around 1,483.95.
The Japanese benchmark Nikkei 225 slipped 0.33% to close at 20,516.56, with index heavyweight and robot maker Fanuc shedding 1.56%. The Topix index, on the other hand, finished the trading day in Tokyo slightly higher at 1,499.93.
SoftBank Group shares slid 0.23%. After market close, the Japanese conglomerate reported quarterly operating income for the three months that ended June 30: It fell 3.7% on-year to 688.8 billion yen ($6.49 billion) but it still beat analysts’ expectations. Operating income from SoftBank’s Saudi-backed Vision Fund and Delta Fund rose almost 66% to 397.6 billion yen for the quarter.
South Korea’s Kospi closed 0.41% lower at 1,909.71 as shares of industry heavyweight Samsung Electronics slipped 0.69%. Over in Australia, the S&P/ASX 200 ended its trading day 0.64% higher at 6,519.50.
In Hong Kong, the Hang Seng index fell 0.14%, as of its final hour of trading. Hong Kong-listed shares of Chinese electric vehicle maker BYD dropped more than 5% after the company reported that its July sales volume fell about 17% compared to a year earlier. The firm’s Shenzhen-listed shares slipped 1.11%.
Overall, the MSCI Asia ex-Japan index was lower by 0.05%.

Chinese yuan

The onshore yuan changed hands at 7.0397 per dollar. Its offshore counterpart, which last traded at 7.0725 against the dollar, is used by foreign investors and banks.
The yuan broke a closely watched level of 7 against the dollar on Monday, sending markets across the globe into a frenzy and leading the U.S. Treasury Department to label China as a currency manipulator.
For its part, the PBOC rejected the U.S. Treasury’s claims on Tuesday, saying that the “United States disregards the facts and unreasonably affixes China with the label of ‘currency manipulators,’ which is a behavior that harms others and oneself.”
Markets are “still grappling with the escalation in trade tension as the yuan depreciated through the key level of 7 to the (dollar), and the US labelled China a currency manipulator,” analysts from ANZ Research wrote in a morning note.
The Chinese central bank’s “stronger-than-expected fixing of the yuan yesterday and reiteration that it won’t seek to competitive depreciate, helped stabilise markets,” the ANZ analysts added.
Those moves came after U.S. President Donald Trump unexpectedly announced late last week that fresh tariffs would be slapped on additional Chinese exports from Sept. 1, intensifying the trade war between Beijing and Washington.
“The decision by (Chinese President) Xi Jinping to allow the (yuan) to dip a little bit is the Chinese equivalent of a tweet, ” Daniel Russel, former assistant secretary of state for East Asian and Pacific Affairs, told CNBC’s “Street Signs ” on Wednesday.
“It’s a signal to the U.S., it’s a signal to Donald Trump. It says: ‘Hey if you want to fight you’re gonna take a few punches,’” Russel added. “China’s not gonna rollover, China’s a big country, a big economy and it politically simply won’t allow itself to be bullied.”

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