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Caution Abounds In Europe As Ted Baker Plunges Again

Published 10/12/2019, 08:56
Updated 03/08/2021, 16:15

Stock markets appear to be in a holding pattern ahead of this week’s key event risk, with the latest Federal Reserve rate meeting set to get underway later today, as markets in Europe opened lower after what was a slightly weaker Asia session.

The latest data from China appears to show an economy that continues to struggle despite a pickup in recent PMI data. The latest inflation numbers showed that a 110% rise in pork prices continued to exert upwards pressure on headline CPI while factory gate prices have continued to remain under pressure indicating a lack of internal demand, with a fall of 1.4%.

A decision on the latest round of tariffs, which is due to kick in on 15th December, along with a reluctance to load up on new positions ahead of year end also helps to explain the cautious mood amongst investors.

In company news international equipment hire company Ashtead (LON:AHT) reported that its latest half year numbers showed that business was in line with expectations.

In the first half of this year, revenues rose by 14% to £2.68bn, which has helped pre-tax profits rise by 6% to £690m, however this hasn’t stopped the shares falling sharply, over concerns that there is downside risk to the outlook.

The implosion in Ted Baker’s share price (LON:TED) continued this morning, plunging over 30% to new 10 year lows after the company cut its dividend and announced a widespread review into the company’s operational efficiency and business model. The chairman David Bernstein, and interim CEO Lindsay Page also resigned, leaving the business rudderless at a time when the business badly needs a steady hand to guide it through what is set to be an extremely difficult period.

The departures put much more pressure on new CFO Rachel Osborne, who joined in October and now becomes acting interim CEO, and probably feels she’s just stepped into the middle of a storm force hurricane.

Management also downgraded the outlook for the remainder of the financial year, as investors absorbed yet another profits warning, as minimum profit expectations were adjusted down to £5m, though this was caveated with the fact a good Christmas period might see a figure closer to £10m..

Group revenue saw a decrease of 0.3% to £203.8m, with total retail sales falling 4.8%. More worryingly on-line sales also slowed, by 0.7%

The latest trading update also showed that the business performed below expectations in November and the Black Friday period, with lower margins and sales. The company has signed some good deals in recent months, however these have been overshadowed by the slowdown in Asia, as well as the troubles in Hong Kong, which means any benefits could take some time to realise.

The big question now is whether the company’s woes will deter a potential bid, after reports in the summer suggested that founder Ray Kelvin, who still owns 35% of the shares, despite his departure earlier this year might be tempted to make a bid, with the help of private equity.

In Germany, Deutsche Bank (LON:0H7D) has reported that in Q4 fixed income trading revenue is expected to come in higher than expected. The bank has also reaffirmed its cost targets for the next three years, though said it might struggle to meet its 2022 core bank ROTE target of 9%.

US markets look set to also open lower as investors adopt a safety first approach ahead of this week’s key event risks of the latest Fed and ECB meetings, and UK election..

Dow Jones is expected to open 40 points lower at 27,869

S&P 500 is expected to open 4 points lower at 3,131

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

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