Stocks in Europe have been helped by the dovish update from Mario Draghi, the head of the European Central Bank (ECB). The major European indices were in the red in early trading, but the remarks from Mr Draghi, that intervention might be required if the current economic situation persists, lifted sentiment, and the softer euro helped eurozone stocks too.
The prospect of ‘additional stimulus’ jolted stock markets higher, and it appears the ECB are following in the Fed’s footsteps of using dovish language.
Ashtead (LON:AHT) announced a 17% rise in full-year profit. The group derives the majority of its revenue in the US, and its US operation registered a 20% increase in revenue, and that helped group revenue jump by 19%. The weakness in the pound on the back of Brexit uncertainty has helped the firm as the bulk of its earnings are in US dollars. There has been some evidence that the US housing market is cooling, and concerns that the US economy might suffer as a result of the trade spat with China is hanging over the company. Ashtead expects to spend £500 million on share buybacks. The Federal Reserve are unlikely to use hawkish language in the near-term, and that should support the property market, and in turn assist Ashtead. The stock has been pushing higher since late 2018, and if the bullish move continues it might retest the 2,200p region.
Safestore (LON:SAFE) revealed a solid set of first-half numbers. Revenue increased by 5.6% and net asset value jumped by 13.7%. Profits slumped by 53%, but that was partially blamed on a reduced gain on investment properties. Like-for-like revenue in the UK and Paris increased by 5.6% and 6.3% respectively, and the group is planning on expending its operations in both regions. The interim dividend was upped by 7.8%, and the company confirmed it is on track to achieve its full-year targets. The stock is lower this morning, but it hit a record-high yesterday, so it appears the good results were already priced-in. A sizeable break above the 660p mark, might bring the 700p area in to play.
Telecom Plus (LON:TEP) posted impressive full-year figures. Revenue ticked up by 1.5% and adjusted profit before tax rose by 3.7% to £56.3 million, which was broadly in line with the company’s forecast. The customer base increased by 4%, and services being provided jumped by 8.2% - which was big increase on last year’s figures. The outlook is optimistic too as the group projects that client and services growth will be 5% and 10% respectively. Even though switching is common practice in the sector, Telecom Plus’s rate remains below the industry’s average – which is a clear sign that clients are happy with the service.
AstraZeneca (LON:AZN) shares are higher this morning after its ovarian cancer medicine, Lynparza, received approval as a first-line maintenance treatment by the European Commission.
EVRAZ (LON:EVRE) was downgraded to hold from buy by VTB Capital, and the firm issued a price target of 670p.
EUR/USD sold-off in the wake of the dovish update from Mr Draghi. The final reading of eurozone CPI was 1.2% for May, meeting forecasts, and the core reading was 0.8%, also meeting economists’ expectations. The German ZEW reading dropped to -21.1 in June, it’s lowest since November 2018. The poor ZEW report underlines the ECB’s need to loosen monetary policy.
Mark Carney, the head of the Bank of England will be speaking at 3pm (UK time). Until Brexit is cleared up, the central banker won’t have much room to manoeuvre, but traders will be keeping an eye on GBP/USD.
We are expecting the Dow Jones to open 74 points higher at 26,186 and we are calling the S&P 500 up 2 points at 2,901.
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