European stocks have rallied this morning following the impressive comeback that US markets underwent last night. The huge swing we saw in US markets yesterday underlines the volatility in markets, and that nervousness still exists.
One good morning doesn’t make up for the dismal week that European stocks had ,and some investors are likely to be playing the wait-and-see game until the US jobs report is released later today.
Berkeley Group (LON:BKGH) shares are higher this morning after the company posted a drop in profit, but they maintained their medium-term outlook and that caught trader’s attention. For the six month period, pre-tax earnings fell by 25.7% to £401.2 million. The London and South East focused house builder blamed for political uncertainty surrounding Brexit for the dip in earnings. The firm confirmed that costs are steady at approximately 4% per year, but that figure might vary depending on what sort of Brexit is agreed. The group kept its two-year outlook unchanged, and that has lifted investor confidence, as it shows the group is only nervous about the Brexit related uncertainty. The stock has been moving lower since June, and if the bearish trend continues it might target 3,170p.
Associated British Foods (LON:ABF) shares are lower after the company said that trading at Primark was ‘challenging’. Retailers have had a tough 2018, but Primark has fared better than most so the cautious update is worrying. The group confirmed that like-for-like sales in September and October were ‘just positive’, while negative in November. The company said that profit at the sugar division will be ‘significantly lower’ due to weakness in the EU sugar prices.
Tesco (LON:TSCO) received a boost from BNP Paribas (PA:BNPP) who upped their outlook for the stock to neutral from underperform.
IP Group (LON:IPO) shares are in the red after Jefferies downgraded the stock to underperform from hold, and the bank trimmed the price target to 95p from 119p.
GBP/USD is lower on account of the firmer US dollar and the underwhelming UK housing data. According to Halifax, UK average house prices dropped by 1.4% in November on a month-on-month basis. The report is further proof that the British housing marked is weakening.
Oil is lower after OPEC and Russia meet again to discuss a production cut. The Saudi’s aren’t keen on a deep cut in order to keep the US happy, while Iran want an exemption from the cut due to pressure on their economy from US sanctions.
The US non-farm payrolls report will be announced at 1:30pm (UK time) and the consensus estimate is 200,000, and keep in mind the October report was 250,000. The unemployment rate is tipped to hold at 3.7% On a yearly basis, average earnings are expected to remain at 3.1%. The wages component will be closely watched because if workers earn more, they are more likely to spend more and that drives the economy along.
We are expecting the Dow Jones to open 152 points lower at 24,795 and we are calling the S&P 500 down 15 points at 2,680.
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