Equity markets stagnate and hunger for trade news, but the relief rally may have a tad further to run. One can’t help but feel the market is already pricing in all the good news, and ignoring the bad. (But then the Fed is back in the game, so it’s one way traffic.)

A deal seems to hinge on the US removing the tariffs it’s placed on China – for all the optimism, this would be a stretch. Whilst we noted yesterday the US appeared to have blinked, and does look prepared to reduce some tariffs and scrap some planned tariffs, demands from China to remove all tariffs in order to complete a ‘phase one’ deal would be too much. The President would probably like a deal soon that he can sell to voters, whilst still looking tough. Backing down on all tariffs for some agri sales and vague commitments on IP wouldn’t achieve that.

On Tuesday, equities struggled for direction as investors wait eagerly for fresh news on the trade talks between the US and China. The S&P 500 slid 0.1% to 3074, just a whisker from the all-time high. The Dow and Nasdaq both eked out slight gains to close at new record highs.

Service sector data from the US was better than expected as the ISM survey bounced back from the three-year low in September. 

Asia took the cue and was directionless in Wednesday. Japan’s service sector slumped to a three-year low, but seems to have been affected by Typhoon Hagibis and the sales tax hike. 

On the open, European markets tracked the global scene to start flattish and mixed. The major bourses all hovered around the flatline as they look for cues from elsewhere.

Campaigning in the U.K. General Election officially starts today.  For financial markets, there two key implications – the path of Brexit and the effect on the domestic economy from business and economic policies. Trying to figure out what the result will be is going to be impossible, given the way voters are cleaving along new lines. Sterling will be sensitive to polling data in particular, although cable is likely to be held within a range of 1.28-1.30. A decisive break to the upside is plausible nevertheless. Downside risks appear limited. Shorts are throwing in the towel as can be seen by the COT data from the CFTC.

The dollar is catching bid amid the broader risk rally, with US 10s around 1.85%. EURUSD touched 1.10625 overnight but has eased off the lows. A surprise rise in German factory activity will underpin greater optimism among euro longs. USDJPY is making a very firm stab at breaking north of 109. GBPUSD is holding below 1.29,

Higher bond yields combined with a firmer buck has sunk gold back down to support around $1485, testing a cluster of key support and the 100-day moving average shaping up around $1475.. Crude oil has retreated off its highs to a little below $57.

Equities 

Kroger shares jumped 11% on improved guidance for 2020. This should be good news for Ocado.

Uber shares fell a similar amount on a blowout $1bn+ loss in the third quarter. Shake Shack got dumped 20% on lower same store sales guidance.

MKS – you have to look under FTSE 250 these days for Marks & Spencer results, but the story hasn’t changed awfully. Clothing and Home looks weak, while Food is holding up ok. October trading has been encouraging, but Marks still has a long way to go.

Food revenues rose 1.2%, and like-for-likes were +0.9%. Clothing and Home is grim. Phrases like ‘in a declining market, the business underperformed’ hardly inspire. LFL revenues were down 5.5%, while total revenues fell 7.8%.

By its own admission, the effort to shake up clothing and home has fallen behind. The string of high level departures points to the trouble. Steve Rowe has taken over directly and binned senior staff. It’s never a great plan for a CEO to go down this route, but progress was too slow. Online is still very slow – sales up a meagre 0.2%. When you compare with Next’s 9-10% growth, M&S has a long way to go.

Group revenue decreased 2.2% at constant currency, largely reflecting lower like-for-like sales in Clothing & Home. 

Profit before tax & adjusting items was down 17.1%, with management citing weak first half Clothing & Home sales. This was though a slight beat to expectations, whilst October trading looks better.

Guidance is ok but rightly very cautious. Looks like they’ll delay some store closures and downs a bit less. Clothing & Home sales now seen falling 2% versus 3% previously guided. Margins are therefore seen even lower at -25 to -75 bps. 

Shares rallied 5% as profits were a little ahead of expectations and October sales numbers picked up. Next said the October uplift it saw from the cold weather would not be replicated through the rest of the quarter though.

Intu knows all about the tough times in retail. CVAs are having a worse impact than expected and the challenging times continue. Extensions at Lakeside and Watford has lifted UK footfall that was otherwise flat. Management anticipates that like-for-like net rental income for 2019 will be down by around 9%, with more than half the reduction coming from the impact of CVAs such as Arcadia and Monsoon. Most rent has been collected for 2019 but you can never write off another major retail failure. Management notes that the ‘majority’ of its top-20 customers are well capitalised, global businesses.