Stocks in Europe are firmly lower this morning as traders are nervous about the state of the Chinese economy. The second-largest economy in the world posted respectable services figures overnight, but the central bank cut the reserve requirement ratio for the fourth time in 2018. The fact the authorities are cutting the amount of capital banks need to hold in relation to their loan book suggests they are worried about the economy. It gives off the impression the country is gearing up for a protracted trade spat.
Italian stocks remain under pressure after Matteo Salvini, the joint Deputy Prime Minister, said that credit rating agencies must be fair when reviewing the country’s credit rating. Mr Salvini ruled out taking Italy out of the euro. The mention of the credit rating agencies indicates that he is worried about negative outlooks and reviews, and this is prompting traders to dump Italian stocks. The county has enormous debt, and he is looking to increase the budget deficit, which is likely to push the debt level higher, so he knows full well the nation could be in line for ratings downgrades.
Reach (LON:RCH) shares are in the red after the company confirmed that third-quarter group print advertising fell by 20%, and circulation slipped by 4%. Group revenue jumped by 21%, but that was due to the acquisition of Express & Star. On the bright side, digital revenue ticked up by 7%, but it wasn’t enough to woo investors. The sector as a whole is in decline, and that has been reflected in the share price. The stock has been in decline for over four years, and if the bearish move continues it could target 50p.
Schroders (LON:SDR) confirmed it was in talks with Lloyds (LON:LLOY) about possibly working together in the wealth management business. Recently there was chatter that Schroders could win the £109 billion contract for Lloyds’ Scottish Widows business. Lloyds has been on the out for a partner to manage that component of the business ever since it cancelled the contract with Standard Life (LON:SLA) Aberdeen earlier this year.
Hammerson (LON:HMSO) announced it has agreed to sell a 50% stake in Highcross shopping for £236 million – which was a 5% discount on the book value in December. The property company will use some of the funds raised to remodel a former House of Fraser store. Hammerson is 90% on its way to achieving its target of disposing of £600 million worth of properties this year. Retail parks are losing out to online shopping, and Hammerson’s shares price has been in decline since 2015, and if the negative move continues it could target 400p.
The continued dominance in the US dollar has hurt EUR/USD, and the disappointing German industrial production figures added to the singe currency’s woes. The update showed a 0.3% decline in industrial production in August, which was well below the 0.4% growth that economists were expecting. Today’s report adds to the string of underwhelming economic announcements from the largest economy in Europe.
We are expecting the Dow Jones to open 60 points lower at 26,387 and we are calling the S&P 500 down 4 point at 2,881.
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