Sam Rondon

The dollar recorded a two-month high today, as markets are waiting for a possible cut in US interest rates during this week. The dollar index jumped around 0.1%, its highest mark since 31st May, partially due to the recent US gross domestic product report that beat analysts’ estimates, making some investors feel sceptical whether the Federal Reserve will continue easing this year after the Wednesday meeting. US gross domestic product jumped by 2.1% in the second quarter, beating the estimated 1.8%, as an increase in consumer spending overshadowed some of the issues concerning declining exports and a smaller inventory build. It is widely expected that the US Federal Reserve will cut interest rates for the first time in over ten years this week, a move which is widely seen as a precautionary one to keep the economy safe from global issues and trade pressures.

EssilorLuxottica (EPA:EL) plans to acquire Dutch optical retailer GrandVision (AMS:GVNV) for up to 7.2 billion euros ($8bn) in cash, a move that will give the French company control of a great number of stores where it sells its products. This is a significant move for EssilorLuxottica, a company that got formed in 2018 from the merger of French ophthalmic optics company Essilor and Italian eyewear group Luxottica. The Schiphol-based eyecare retailer GrandVision and owner of chain stores such as Vision Express in the UK and For Eyes in the US, would give EssilorLuxottica power over more than 7,000 stores worldwide where it already sells its products such as Varilux lenses and Ray-Ban sunglasses. However, there is a high possibility that the merger will get investigated by competition regulators. The EU recently authorized the 48bn euro merger of Essilor and Luxottica after a thorough investigation.

Global stocks tumbled as weaker-than-expected factory data from China, and cheerless US-China trade talks had investors worried while waiting for today's Fed rate decision. There were also indications that trade talks might be delayed until after 2020 elections. "China is doing very badly, the worst year in 27 - was supposed to start buying our agricultural product now - no signs that they are doing so," the US President Donald Trump tweeted yesterday. "That is the problem with China, they just don't come through. Our Economy has become MUCH larger than the Chinese Economy is the last 3 years." The Nikkei index lost 0.86% on the last trading day of the month settling at 21,521.53 points. The STOXX Europe 600, which stayed relatively flat during the month, slipped 0.03% in Frankfurt, while UK’s FTSE 100 tumbled 0.32% despite the pound recently hit a 28-month low of 1.2155 against the US dollar.

Stocks performed differently yesterday, with the Dow moving slightly higher and the S&P 500 dropping lower. On 26th July, the S&P 500 (SPX) recorded a record high, as well as the tech-heavy Nasdaq Composite (COMP). Today, however, the S&P tumbled 0.2%, and the Nasdaq fell 0.4%, while only the Dow (INDU) ended 0.1% higher at 29 points. The Federal Reserve meeting will be the top-priority event this week for investors, as the central bank will make its decision regarding interest rate cuts on Wednesday at 2pm ET. If it happens, it will be the first-rate cut in a decade. Expectations of a rate cut have been fully priced in for a while now, with the odds of a quarter-percentage-point cut being at 76%, according to the CME's FedWatch tool. It will be a busy week for investors, with the trade talks between the US and China happening today and tomorrow, and the long-awaited decision from the Fed.

BP (LON:BP) reported a better-than-expected second-quarter profit, thanks to a large boost in oil and gas production, helping to compensate for the weaker crude prices and lifting the company’s shares. Shares of the oil and gas giant rose 3% this morning, while the FTSE index climbed 0.1%. The company’s underlying replacement cost profit, which BP defines as the net income, climbed to $2.8bn in the quarter, beating its previously issued forecast of $2.46bn. The Q2 profit was $2.4bn higher than in the previous quarter. BP managed to beat analysts’ estimates for 10 quarters in a row. “Strong volume growth from accretive barrels and seamless execution remains underappreciated,” said analysts at Bernstein, which rated the BP’s stock “outperform.” BP said it doesn’t expect that the third quarter will be as good as this one, due to the maintenance costs and the impact of Hurricane Barry on the company’s operations in the Gulf of Mexico.

The dollar recorded a two-month high today, as markets are waiting for a possible cut in US interest rates during this week. The dollar index jumped around 0.1%, its highest mark since 31st May, partially due to the recent US gross domestic product report that beat analysts’ estimates, making some investors feel sceptical whether the Federal Reserve will continue easing this year after the Wednesday meeting. US gross domestic product jumped by 2.1% in the second quarter, beating the estimated 1.8%, as an increase in consumer spending overshadowed some of the issues concerning declining exports and a smaller inventory build. It is widely expected that the US Federal Reserve will cut interest rates for the first time in over ten years this week, a move which is widely seen as a precautionary one to keep the economy safe from global issues and trade pressures.

Today, Ryanair Holdings Plc (LON:RYA) said fares would drop by 6% during the summer season because of escalating Brexit tensions and overcapacity in Germany, but the company has maintained its 2019 profit target. Shares of the Irish low-cost airline fell by almost 50% over the past two years the company struggled with overcapacity issues in Europe, Brexit tensions, and the recent delays in delivery of the Boeing 737 MAX. According to the quarterly report, Ryanair made an after-tax profit of 243 million euros ($270.36m) for the quarter through 30th June, significantly lower than 309 million in the year-ago period. However, it beat the consensus estimates of 232 million euros. The airline reduced its growth targets for the next year by 50%, mostly due to the delays in deliveries of the Boeing 737 MAX. The company said the first deliveries will likely happen in January 2020. Shares of Ryanair were trading at 10.02 euros on Friday.

A no-deal outcome concerning Brexit could bring “unforeseen and sudden surges in volatility”, said Michael Boutros, currency strategist for DailyFX.com. Boutros added that depending on the Brexit situation, challenging times for traders could lie ahead, warning them to plan their moves carefully. His warning is based on how Brexit chaos made it much more difficult to predict the price of sterling, saying buyers should “exercise stricter risk management in any GBP-based setups.” A dark cloud moved over the forex markets following the Leave vote and the pound’s value declined against the US dollar. The pound continues to show weakness against the US dollar as the “deal or no-deal” situation remains unresolved. The only thing that would almost completely heal the British pound is if Brexit doesn’t happen, which is an outcome that doesn’t seem likely at all with Boris Johnson, a supporter of the Leave vote, recently becoming the prime minister.

Amazon (NASDAQ:AMZN) reported better-than-expected second-quarter revenue, while its profit missed the consensus estimates. The company reported earnings per share of $5.22, lower than the expected $5.57. The reported revenue was $63.4bn, beating the analysts’ estimates of $62.5bn. However, shares of Amazon tumbled 2%, after the online giant gave the third-quarter profit guidance that was significantly lower than analysts’ estimates. During the second quarter, Amazon spent $800m for upgrading its warehouses and delivery infrastructure in order to make one-day shipping possible. However, this big investment affected the company’s profit margins. So Amazon lowered third-quarter operating income guidance to be in the range of $2.1bn and $3.1bn, which is much lower than consensus estimates of $4.4bn. “Q2′s results were negatively impacted by margin compression in North America due to the investments in next day Prime delivery, which we continue to believe is an example of short-term pain for long-term gain,” said Charlie O’Shea, an analyst at Moody’s.

Nissan (TYO:7201) plans to cut 12,500 jobs worldwide, twice the number the company had previously announced. This move will lower the production capacity and the number of produced vehicles by 10%. The Japanese carmaker is making this move in response to declining sales. Earlier this year, Nissan announced 4,800 job cuts, which eventually increased to 12,500. Union sources said they’re hoping that the company’s Sunderland car plant will avoid the cuts. Nissan announced a Q1 net profit drop of 94.5% today, one of the company’s worst quarters in 10 years. The carmaker is having a hard time in the US, one of its largest markets, trying to keep up with its peers. It is expected that Nissan will cut jobs mostly in factories in South America and other regions where the company’s profitability is lower, while its Sunderland plant, the largest car factory in the UK, appears safe for now.

The UK’s second-largest mobile network operator, O2, announced its plan to roll out its 5G service in October. At first, the company will launch the network in Belfast, Cardiff, Edinburgh, Slough, Leeds and London, which will increase up to a total of 50 cities by 2020. O2 will be the last of the telecommunications companies to launch 5G in the country. However, it will also be the only company that will roll out 5G without using Huawei’s equipment. O2 have used Huawei’s equipment in the past, but for launching 5G the company will use the equipment by Nokia and Ericsson. "We respect all three operators, they were thorough in their submissions," O2's CEO Mark Evans said. "But we were convinced that the best choices for us at this time are our current partners, which are Ericsson and Nokia." Some of the locations O2 said it will provide its 5G network at are train stations, entertainment and sports venues and popular shopping centres.

Vodafone Group Plc (LON:VOD) and O2 will join forces and share equipment in the UK in order to launch 5G in the country sooner. The two companies plan to deploy their own radio equipment in 23 big cities, representing nearly 16% of combined mast sites. The 5G network autonomy already exists in London, which represents a total of 25% of combined mast sites. “We’re driving our 5G roll-out forward with this agreement, and taking our customers, our business and the whole of the UK with us,” said Nick Jeffery, Chief Executive of Vodafone UK. “Greater autonomy in major cities will allow us to accelerate deployment, and together with active network sharing, ensures that our customers will get super-fast 5G in even more places more quickly, using fewer masts.” Cornerstone, an existing joint venture of Vodafone and O2 which manages their mobile towers, will take part in the deployment of both networks.

The Financial Times Stock Exchange 100 Index, better known as FTSE 100 Index, is trading at 7,526 this morning, which is a decrease of 0.4%, amid continuous concerns over Brexit. The worst underperformers today are mining heavyweights, in addition to luxury carmaker Aston Martin (LON:AML), which saw its shares tumble 22% after the company lowered several of its forecast due to underperforming UK and European markets. “The worry is that the UK could rush out of the European Union without a deal if Johnson fails to negotiate a Brexit deal that could satisfy both parties, a challenge that his predecessor Theresa May couldn’t overcome in more than three years,” said Ipek Ozkardeskaya, senior analyst at London Capital Group. The British Pound is meanwhile trading at $1.2445 after recording three consecutive daily losses. “When the ministers return from their holiday in September, the clock will be ticking loudly until the October 31 deadline. This means more downside pressure on the pound.” The FTSE was previously on a three-day winning streak.

Global policy issues such as trade wars with China and the European Union are one of the main factors in the undervaluation of the S&P 500, according to UBS strategist Keith Parker, who thinks that the index is nearly 8% undervalued because of global policy issues alone. His research, which is based on the Baker, Bloom and Davis Index and used to calculate policy uncertainty trends, showed global policy uncertainty reached its peak levels of the last five years just after the 2019 G20 Osaka summit. This has created compression in the price-to-earnings multiple of the S&P 500, said Parker. He estimates that its PE multiple is nearly two times too cheap at the moment. However, the UBS strategist stays optimistic. “While we see policy uncertainty unlikely to revert to the 2005-07 lows, we do see a growing case for uncertainty to decline absent further shocks or recession – given the G20 détente, central bank pivots and China stimulus,” Parker said.

The financial services company UBS (SWX: UBSG) reported its best quarterly net profit in nine years. The bank reported a Q2 net profit of $1.4bn, higher than $1.29bn from the year-ago period. Although its investment bank and wealth management units have been struggling lately, the bank managed to significantly boost its profits. “We saw a normalization of the environment coming out of a good March into the rest of the quarter. I’d say the highlights were clearly: diversification paid off again,” said Sergio Ermotti, CEO of UBS. However, the lender’s global wealth management and investment bank units didn’t have such a strong quarter. The wealth management posted an operating profit of $886m, lower than the $1bn reported from the same period last year, while the investment bank created an operating profit of $440m, compared to $571m in Q2 of 2018. Shares of UBS stayed relatively flat after the market open.

Yes, the British Pound is trading 0.32% lower against the USD this morning, further extending its losses this week. The 15-month low sits at 1.2382 as the GBP trades around the 1.2430 handle currently. The Bank of England’s Michael Saunders has added further pressure on the GBP this morning by saying that Brexit might stop the bank from raising interest rates. “The economy right now is clearly not overheating - the underlying pace of growth, stripping out all of the funny effects, inventories, car shutdowns and so forth, is weak and below trend,” Saunders said. "It's hard to know how it would play out with any certainty and I wouldn't want to give a strong steer now as to which way policy would go," he added. The fact that Saunders is supposed to be BoE’s main hawk says a lot considering others are even less optimistic than he is.

The United Kingdom’s Work and Pensions Select Committee has sent a letter to the financial services company Standard Chartered Plc’s (LON: STAN) remuneration committee challenging the company’s pension pay rates. The committee chair, Frank Field questioned the bank’s decision to submit a proposal where the current directors would get 40% of base salary (20% of total salary) as the pension contribution while the pension contribution for the directors to come will be narrowed to 10% of total salary. Around 36% of the bank’s shareholders didn’t support its directors’ remuneration policy, which included plans to raise CEO Bill Winters’ pension allowance, among other things. In his letter, the chair also asked if the bank’s remuneration committee followed the Investment Association’s instructions which say that pension contribution levels for executive directors should match the contribution levels of their personnel and asked if the remuneration committee intended to readdress the executive pay policy in 2020.

Yes, the software corporation SAP SE (ETR: SAP) reported a 21% fall in its second-quarter operating profit today, causing its shares to sink. The company said investors shouldn’t expect a significant increase in margins before 2020. One of Europe’s major software companies revised its future guidance, and Chief Executive Bill McDermott said he will work hard on finding a strategic solution to increase margins by five percentage points through 2023. Shares of SAP tumbled 10% at the market open as the company reported lower-than-expected revenue and operating profit, caused by one-off costs and low demand in Asia. Knut Woller from the financial services company Baader Helvea said growth momentum has slowed down following a great start to the year. However, Woller thinks SAP is still on a good way to achieve its yearly targets unless additional economic issues occur. Investors such as activist hedge fund Elliot have boosted SAP’s shares to all-time highs and want to see that it will pay off.

Domino’s Pizza (NYSE: DPZ) have said that heavy discounts and other deals from third-party delivery services such as DoorDash, Uber Eats and Grubhub are hurting the company’s sales and growth. The American pizza giant has its own drivers and doesn’t collaborate with other delivery services, which usually offer very convenient deals for its customers and deliver all kinds of food. For example, Uber Eats often delivers McDonald’s orders free of charge. "We expect that behaviour to continue for some period of time," said Domino’s chief executive Ritch Allison. "While the economics of the business is still open to question for the long term, the near-term activity indicates investors are willing to lose a lot of money in the short term to drive market share." Domino’s Pizza’s domestic same-store sales advanced 3%, missing the analysts’ estimates of 4.8%, partially blaming it on the third-party services that deliver pizza from rivals such as Pizza Hut and Papa John’s.

Although the grounding of the Boeing 737 Max was no small issue, United Airlines Holdings (NASDAQ: UAL) reported a 50% higher profit than from the year-ago quarter, thanks to increasing demand. The Chicago-based airline said it made a deal to purchase 19 used Boeing 737-700 planes, saying this move will help the company meet the rising demand. The delivery will happen in December. According to the reports, second-quarter net income climbed 54% to $1.1bn, or $4.02 a share, significantly higher than the $683m, or $2.48 per share from the year-ago quarter. The reports also show an adjusted EPS of $4.21, higher than the consensus estimates of $4.09 a share. On Monday, the company’s executives authorised a new $3bn share buyback programme. United Airlines had repurchased $536m of its common shares in Q2 2019, an average price of $84.07 per share.

J.P. Morgan (NYSE:JPM) lowered its forecast for 2019 net interest income, which is one of the major sources of the company’s profits. Net interest income got reduced to $57.5bn, $500m lower than the $58bn target in the previous quarter. “With these money-centre banks, the yield curve does matter,” said Marty Mosby, director of bank and equity strategies at Vining Sparks. “Net interest income forecast was pressuring J.P. Morgan’s stock early Tuesday,” he added. The Federal Reserve indicated that it will lower its benchmark interest rate in July, which could significantly reduce margins in the company’s main lending businesses. Analysts will likely ask the leaders of J.P. Morgan how will this move affect the bank’s 2019 results. J.P. Morgan reported better-than-expected earnings today. However, shares of the company tumbled 1.6% in the premarket session following the news about the reduced interest forecast.

PSA Group (EPA:UG) said today its vehicle sales tumbled 12.8% in the first half as disappointing deliveries in China and the Middle East hurt its overseas business, slowing down the carmaker’s recovery. Sales slumped to 1.9 million light vehicles during the January-June period, down from 2.18 million from the year-ago period. PSA is expected to post a full earnings report on 24th July. The manufacturer of Peugeot managed to scrape together a 0.3% gain in sales in Europe, the company’s largest market. “Despite the decline of the global automotive markets for this first half, our commercial teams have managed to increase market shares in several countries,” PSA’s Chief Executive Carlos Tavares said in the statement. The sales of the French carmaker fell in almost all other regions, especially in China, where sales plummeted by nearly two-thirds, due to an extended sales downfall at its joint ventures with local companies Dongfeng and Changan.

The American biotechnology company Gilead Sciences (NASDAQ:GILD) plans to invest $5.1bn and raise its stake in Galapagos NV (AMS:GLPG) and expand the partnership with the Belgo-Dutch pharmaceutical research company. Shares of Gilead jumped 18% after the news broke out today, recording an all-time high. This move will allow Galapagos to use significantly more funds to develop and commercialise its treatments. Gilead will give an upfront payment of $3.95bn and a $1.1bn in shares. The company will pay $158.43 per new share, increasing its stake in Galapagos by nearly 10%. “Gilead gains exclusive access to all current and future compounds in Galapagos’ rich pipeline while Galapagos is able to expand its research activities and build commercial infrastructure,” Gilead CEO Daniel O’Day stated. The two companies plan to work together on developing treatments for inflammatory conditions, one of the most profitable areas in the pharmaceuticals industry.

Cargill Inc’s quarterly report showed a 41% decline in adjusted quarterly profit yesterday, as the supply issues related to the US-China trade war and flooding in the central United States have given the company many issues to deal with. The largest privately held corporation in the States said operating profit dropped to $476m in Q4 through 31st May, much lower than $809m from the year-ago period. The US-China trade war has pummeled the country’s agricultural sector as added tariffs have affected product exports from the United States. Devastating flooding across the country’s farm belt has created additional problems for the company. “It was an off quarter. It wasn’t what we wanted but we’re quite optimistic about where we’re taking the company,” David Dines, Cargill’s CFO. “When you combine the weather with the trade war, it’s just a challenging time for the industry,” Dines added.

Shares of Delta Air Lines (NYSE: DAL) climbed today after the American airline raised its profit guidance for the year thanks to increasing travel demand. Delta’s Chief Executive Ed Bastian said the extension of the Boeing 737 Max probe also had a positive impact on his company. The airline estimates earnings between $6.75-$7.25 per share this year, higher than the previous forecast of $6 to $7 a share. Delta’s shares advanced more than 2% following the quarterly report. “We do not fly the Max and clearly there was a benefit to the airline in the quarter,” said the company’s CEO Ed Bastian. “It’s taken longer than any of us expected to see it return to service. We don’t have a crystal ball on that.” According to the report, Delta’s Q2 profit is 30% higher than a year ago, beating the consensus estimates as the travel demand continues to rise.