September 23, 2019 / 7:50 AM / a month ago

Daily Briefing: Markets turn gloomy again

World markets began the week in a hesitant fashion, with last week’s optimism over U.S.-China trade talk doused and business headlines dominated by the overnight collapse of UK travel firm Thomas Cook.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., September 18, 2019. REUTERS/Brendan McDermid

Release of September flash business surveys from around the world later in the day could set the tone for the rest of the week, with the absence of Japanese markets earlier draining activity overnight.

Reports on Friday that Chinese trade negotiators cancelled a good-will visit to U.S. farms threw cold water on the preparatory talks late last week.

Wall Street stocks ended in the red, with traders seeing little progress before top-level talks next month despite last week’s U.S. postponement of another series of planned tariffs.

Shanghai fell 1.4% earlier and Hong Kong’s Hang Seng was down about 0.8% after another weekend of sometimes violent street protests.

Tokyo was closed and Seoul’s Kospi ended flat. U.S. stock futures were up, European equivalents down.

The dollar and U.S. Treasury yields were mostly steady after last week’s quarter-point U.S. interest rate cut left markets underwhelmed about the Federal Reserve’s commitment to further monetary easing.

Temporary ructions in the U.S. repo and money markets have dissipated after a series of Fed market operations, but traders are uneasy about how the Fed’s market monitors allowed the situation to develop in the first place and fretting about whether it would be nimble enough to deal with more serious liquidity problems in future.

Elsewhere, oil prices were up as investors continued to watch military developments in the Middle East and Saudi retaliation for last week’s attacks on its oil facilities.

Sterling was weaker before this week’s UK Supreme Court decision on the legality of the recent suspension of parliament and the opposition Labour Party’s wrangling over Brexit.

UK PM Boris Johnson will meet with European Union leaders at the United Nations General Assembly in New York this week but said a breakthrough on the Brexit impasse was unlikely to happen there.

The Thomas Cook collapse also hit sentiment as the UK Civil Aviation Authority sets about getting roughly 150,000 stranded tourists home in the biggest peacetime repatriations of UK citizens.

Thomas Cook shares were suspended; shares in rival European tour operators such as TUI are expected to rise about 4%.

The travel sector at large was in play.

Airlines, which could be supported as Thomas Cook’s collapse is expected to remove over-capacity.

Other stocks linked to tourism such as Amadeus, Melia and NH HOTEL may gain.

Elmos Semiconductor is seen rising as much as 5% after it agreed to sell Silicon Micro.

German real estate company Vonovia might be hit after it agreed to buy Swedish Hembla from Blackstone.

Private equity firm Advent is in talks to join Bain in its takeover bid for Germany’s Osram, Bloomberg reported.

That move could further fuel the bidding war with AMS for the lighting group.

A profit warning from DEUTZ is seen sending shares in the engine maker down 5%.

Traders were also watching Marks & Spencer, whose chief financial officer stepped down after little more than a year. The shares are seen opening lower.

In the battered banking sector, Spanish banks could benefit after S&P’s upgraded the country’s credit rating.

A look at the day ahead from EMEA markets editor Mike Dolan. The views expressed are his own. 

Editing by Larry King

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