Equity markets appear to be shrugging off last night’s threats by President Trump to impose further tariffs on the remaining $267bn of Chinese goods, as well as a 10% tariff on iPhones and computers imported from China. The perception is that the US President is adopting his tried and trusted playbook of upping the rhetoric ahead of a key meeting before dialling it down with a more conciliatory tone as the meeting gets underway.
Having come off the back of a bit of a setback in the US midterms President Trump is likely to want to be able to take away something positive from this week’s meeting, which suggests that some form of uneasy truce is likely to be the most probable outcome.
As for Apple (NASDAQ:AAPL), and the impact from possible tariffs which helped push the shares lower in post market trading, any negative effects are likely to be overstated given that the firm was able to absorb the impact of lifting the ceiling price on its most expensive iPhone model by much more than that with its recent upgrades.
Markets in Asia have had a largely mixed session, and this has spilled over into a more cautious start in Europe this morning, after yesterday’s strong gains.
Italy’s budget talks unsurprisingly yielded very little overnight with talk that a new deficit target of 2.2% could be put forward for 2019. This is still unlikely to be well received by the EU Commission.
The pound has come under pressure overnight as it becomes clear that Prime Minister May’s Brexit deal will probably not get through the UK parliament. Comments from President Trump that the deal may make a US/UK trade deal less likely have also been cited, however any deal with the US still remains some way off, and by the President’s own admission he said he hadn’t seen the details of the EU deal.
It’s been a challenging year for travel operators and airlines, buffeted by the “Beast from the East” at the beginning of the year, followed by industrial action in Europe, as well as rising oil prices through the summer.
In September Thomas Cook (LON:TCG) followed on a profits warning in July with another warning that its profits for the year would be hit by the summer heatwave as people opted to stay at home rather than brave the airport chaos.
As a result the company had to shave margins to entice people to book and having guided profits down to £280m, from a previous £323m, this morning’s news that profits have fallen short of the revised guidance to an even lower £250m hasn’t been received well. The timing is particularly curious given that the company is due to announce its full year numbers, later this week.
CEO Peter Fankhauser blamed a number of “legacy and non-recurring charges” of £28m for the downgrade to profits, which hopefully Thursday’s full year numbers will give further clarity on.
The statement went on to warn about the outlook, despite saying that the company was ahead on UK bookings for next year, while revenues on a like for like basis rose 6%. Other silver linings were sales of holiday’s to own brand hotels which were up 15%, with at least another 20 new hotels in the pipeline for 2019.
Nonetheless the woe continues for shareholders, in what has been an awful year for Thomas Cook. Before this morning’s announcement, the share price had already fallen 60% year to date and this announcement along with the news that the company was suspending the dividend has seen the shares plunge another 30%.
The decision to cut the dividend can’t have been taken lightly however the lack of dividend is likely to be the least of shareholders problems given how badly the shares have performed this year.
Also falling is NMC Health which has been downgraded to “underperform” by broker Jeffries on pessimism that it will be able to do as well in its Saudi market as it claims. The broker also cited corporate governance concerns with respect to its incentives for share awards programs.
In the wake of last night’s comments by President Trump US markets look set to open modestly lower, with Apple’s shares likely to be a key focus, along with other tech stocks after yesterday’s rebound, in light of the President’s comments after the bell.
Dow Jones is expected to open 50 points lower at 24,590
S&P500 is expected to open 8 points lower at 2,665
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