Asia markets finished rather mixed despite the continuing tensions between the US and China as they indulged in further tit for tat retaliation with additional tariffs on each other’s goods which are due to start on 23rd August.
Both countries now have 25% tariffs on up to $50bn of goods and services and don’t appear to be showing any signs of dialling down on the current sparring. The latest Chinese inflation data for July did show some signs of higher prices with PPI rising by 4.6%, slightly down from 4.7% in June, but still above expectations of 4.4%. Most of this was driven by slightly higher commodity prices, while CPI also edged up to 2.1%, though there was little sign that the higher tariffs were starting to trickle down into the headline numbers.
This may well change in the coming months especially if the Trump administration follows through on its threat to extend tariffs on to another $200bn worth of Chinese goods, while concerns about new US sanctions on Russia may well also limit the upside for European markets today.
For the time being, markets appear to be putting to one side the prospect of this happening in the near future which suggests that for now we are probably in the foothills of a full blown trade war.
That doesn’t change the fact that European markets have underperformed their peers in the last few weeks and today’s open doesn’t look like it will be any different, as we get another lower open.
Investors appear to be more interested in individual earnings numbers than the trading backdrop for now with some more key announcements today.
Support services provider G4S (CO:G4S) which along with its sector peers has had a pretty rough ride in recent years, has seen its profits come in at £212m, down from £219m a year ago. Revenues were slightly higher with the company announcing £700m in new contract wins in the first half, as the company left its guidance unchanged for the rest of the year. With the shares near six month highs, investors appear to be using this decline in profits as an excuse to take some profits.
When Cineworld took the decision to pay $3.6bn for US cinema operator Regal Entertainment there were some raised eyebrows that taking on such a large acquisition was risky at a time when streaming sites like Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN) Prime and iTunes were changing the entertainment experience. The popularity of these sites along with changing consumer viewing habits had helped push the US summer box office takings to two decade lows.
While the focus is likely to be on the Regal acquisition the company has also continued its improvement and expansion plan in the UK. Today’s half year numbers have shown that revenue rose to $1.86bn, while profits rose to $190.2m for the first half of the year, helped by a strong US performance, while management were also optimistic about the remainder of the year with blockbusters like Mission Impossible – Fallout and Mamma Mia Here We Go Again set to build on a strong first half.
Breakdown and insurance provider AA reported on its latest trading saying that it remained on track to meet its full year guidance of £335-345m, despite a tough first half of the year due to higher breakdowns due to the adverse weather conditions in the first quarter.
The pound has taken a beating over the past few days over rising concerns about a no deal Brexit outcome, hitting its lowest levels this year against the US dollar and euro, after weekend comments from UK trade minister Liam Fox that the prospect of a “no deal” outcome had risen to 60%.
Whether you believe such a scenario is likely or not, such as the incompetence of this government, as well as its opposition, investors would be foolhardy not to take some steps to hedge against such an outcome.
US markets continue to be driven by the tech story with the Nasdaq closing higher again yesterday with Facebook (NASDAQ:FB) and Amazon helping drive those gains. On the data front, the latest weekly jobless claims are expected to come in flat at around 220k, while today’s weaker European start has seen US future slip back with a possible lower open later today.
Dow Jones is expected to open 60 points lower at 25,523
S&P500 is expected to open 4 points lower at 2,854
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