Asia markets struggled to make headway overnight despite another positive US finish, as concerns about further trade escalations tempered investor enthusiasm, after the US outlined another round of tariffs on $16bn worth of Chinese goods starting on 23rd August.
If the US was hoping that its $34bn opening salvo of tariffs would have an effect on Chinese exports this morning’s China trade numbers would have been a disappointment to them. Chinese exports for July saw a rise of 12.2% up from 11.2% in June, supporting the premise that for the moment we seem to be in a bit of a phony war. We also saw a big rise in imports of 27.3% showing that domestic demand remains quite strong.
Markets in Europe opened slightly lower this morning after yesterday’s positive session with the upside once again limited by trade concerns, and the additional tariffs announced by the US.
On the companies front 21st Century Fox decided against topping Comcast’s bid of £14.75 for Sky but did formalise its offer at £14 a share for the 61% of the business it doesn’t already own.
Disney (NYSE:DIS) profits last night missed expectations after the closing bell last night despite the new “Avengers” film and the “Incredibles 2” posting strong numbers. A $100m write off on two cancelled animated projects appears to have prompted the miss, but does validate its decision to pull back from overpaying for 21st Century Fox’s assets.
Glencore (LON:GLEN) shares have slipped on the open despite reporting first half numbers that beat expectations. The company posted record H1 profits as well as cutting its net debt to $9bn, but decided to hold back from adding to its buyback program.
Paddy Power Betfair (LON:PPB) shares have slid on the open despite posting a small rise in first half profits, helped by a better than expected World Cup performance. Both pre-tax profits and revenues increased, while the company raised the dividend by 3%. It would appear that a cut in the company’s average forward guidance estimate for the second half of the year has prompted this morning’s bout of profit taking.
Ahead of the US open Tesla shares are likely to be in focus after last night’s news that CEO Elon Musk was looking to take the company private at a price of $420 a share. It is no secret that Musk has undergone a great deal of criticism in recent months for his, at sometimes flippant attitude to investor concerns, about the amount of money that the company is losing.
This has prompted a rather strained relationship with investors over worries that Musk doesn’t take their concerns seriously. As a result, the stock has become a target for short sellers, which Musk appears to have taken as a personal slight. This may well be behind last night’s tweet that he wanted to take the company private and that he had secured the funding to do so.
While no one should bet against Elon Musk it is hard to imagine who would be brave enough to provide the funding for such a purchase without certain guarantees. The sum of over $75bn is a lot of money and he may find that no matter how much he chafes against ordinary shareholder criticism the bar is likely to be a lot higher when it comes to private funding. He should be careful what he wishes for, as he may find that it is hotter in the fire of private ownership than it is in the frying pan of public shareholders. Having said that having fewer shareholders to keep happy is an easier job than multiple shareholders who usually have different time horizons.
If this is another ploy by Musk then it is hardly likely to sit well with shareholders in the longer term who will increasingly begin to question his temperament. Being an innovator is one thing, but being a CEO requires a completely different mindset.
Snap shares are also expected to be in focus after the company saw a rise in revenues as it struggles to make headway against Facebook (NASDAQ:FB). A slight worry was the decline in daily active users, raising concerns that we may have reached peak social media as people tire of the sometimes toxic environment online social media tends to generate. A $250bn share purchase by Saudi billionaire Prince Alwaleed Bin Talal also helped any may help stem some of the recent share price weakness.
Dow Jones is expected to open unchanged at 25,629
S&P500 is expected to open unchanged at 2,858
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