One week to go until the 1st March China, US trade deadline and we don’t appear any closer to finding out whether it will be extended. That still seems to be the most likely outcome given some of the smoke signals coming from recent discussions, as well as all the chatter over various memoranda.
It is reported that President Trump will meet China’s top trade negotiator Liu He, later today to assess the progress on the ongoing talks, which might suggest that next week’s deadline could well get pushed out. That is already something that President Trump has indicated might happen given his recent comments that the date was not set in stone.
Markets in Europe have opened mixed this morning with the CAC40 and German DAX still within touching distance of their recent multi month peaks, while the FTSE100 performance has been disappointing.
The bloodletting in terms of banking job losses looks set to continue in the European banking sector this morning after French bank Societe Generale (PA:SOGN) announced it was cutting thousands of jobs in its investment banking division after recently reporting a disappointing end to the most recent quarter. They are also reported to be considering spinning off the equity business into some form of joint venture, as banks across Europe battle to control costs as regulatory burdens and oversight pressures increase.
In company news Legoland and Alton Towers owner Merlin Entertainments (LON:MERL) has sold its Australian ski resorts for £95m to US based Vail Resorts, as it looks to expand in Asia markets, while UK dairy company Dairy Crest has agreed to a 620p acquisition by Canada’s Saputo Dairy.
Earlier this week education publisher Pearson (LON:PSON) announced the sale of its US K12 courseware business to Nexus for $250m. This business provided the education material for course work for students from kindergarten to 12th grade, as the company focuses its efforts on virtual school and higher education.
Today’s full year numbers show that the business in the US continues to be challenging, with revenues declining 1%, which in turn helped contribute to an overall sales decline of 9%.
Profits did rise to £553m, though this was largely due to the disposals of Wall Street English and the online University partnership in Mexico, UTEL, while the company has managed to reduce its debt to £143m from £432m at year ago. For 2019 the company said it expected to see profits to improve to around £600m.
After a disappointing session yesterday US markets look set for a modest rebound on the open, with the main focus of attention likely to be on last nights news of a huge write down and loss for Kraft-Heinz, after they reported their latest numbers after the bell.
The shares are expected to drop sharply on the open after the company announced a huge $12.6bn loss, cut its dividend, and announced that it has been subpoenaed by the SEC for accounting irregularities.
On the earnings front we’ll be looking to the latest numbers from cloud storage minnow Dropbox. When the company IPO’d just under a year ago there was more than a little scepticism that it deserved its $17 a share $7bn valuation. In the aftermath of the launch the shares did reach a peak of over $42.50 putting aside those concerns with interest, however the shares have since halved from those frothy peaks, though they haven’t dropped below their initial IPO valuation.
Even allowing for the falls in the shares the company remains vulnerable in an extremely competitive cloud environment, where it has to compete with Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) cloud services to name a few. This means that in terms of pricing it is vulnerable to loss leader pricing by its bigger rivals who could choose to squeeze margins due to their bigger scale. In November the company surprised by beating expectations of revenues and profits and this is expected to continue in Q4 with profits of $0.08c a share.
On the economic data front there is little in the way of US data, however Canada is releasing its latest retail sales numbers for December, which aren’t expected to show a significant improvement on the poor November numbers. For all the optimism that the Canadian economy is in fairly good shape, there is some concern that the recent rises in rates has started to impact house price values, as well as consumer spending.
December retail sales are expected to reinforce these concerns with a drop of 0.3%, still an improvement on the 0.9% decline in November, but reinforcing the perception of a consumer that is struggling with the combined effect of rising interest rates and lacklustre wage growth.
We’ll be waiting to hear from a number of Fed speakers for clues as to how they perceive the US economy has evolved, a few weeks on from the last Fed meeting.
We’ll get to hear from Fed vice chair Richard Clarida as well as the new head of the New York Fed John Williams (NYSE:WMB), with input from St. Louis Fed President James Bullard as well as Fed governor Randall Quarles
Dow Jones is expected to open 65 points higher at 25,915
S&P500 is expected to open 7 points higher at 2,782
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.