Stocks are rallying this morning as the feelgood factor in relation to central bank expectations continues to circulate. The European Central Bank (ECB) meeting is on Thursday ,and traders are at least expecting some dovish language, and there is a possibility the ECB might cut rates as the Fed are widely expected to lower rates at the end of the month. Corporate earnings are on the rise, but they are playing second fiddle to the central bank expectations.
Fevertree shares are in the red this morning even though the group posted a broadly positive set of first-half numbers. Revenue and adjusted first-half earnings increased by 13% and 8% respectively. The gross margin for the period was 51.9%, which compared with 53.2% in the same period last year, and that took the shine off the rest of the report. The dividend was upped by 23%, and the group had ‘continued growth across all four regions’. Despite the sizeable drop in share price in the past 10 months, stock is still up over 180% in the past three years. No doubt the gin craze in recent years has helped the company, but expectations seems to have been reigned in as gin market has already undergone incredible growth.
According to Kantar research, the big four UK supermarkets all lost ground in terms of sales, as the deep discount stores, Aldi and Lidl, continue to gobble up market share. In the 12 weeks until mid-July, Sainsbury’s, Asda, Morrisons, and Tesco (LON:TSCO), all lost between 2% and 2.6% in sales. Meanwhile, Aldi and Lidl saw increases in sales of 6.7% and 7% respectively. The update from Kantar said that total grocery sales in the 12 week period dipped by 0.5% - its first decline since 2016. The news is worrying for grocers across the board, and it appears that Brexit is the common link between the negative readings. The fragile consumer climate means the established supermarkets will need to become even more nimble in order to ride out the downbeat environment.
Paragon shares are a little higher this morning as the group posted a solid trading update. The group said that lending jumped by 20%, and net interest margin is expected to be above 2.24% - the level reported in the first-half results. The group continues to operate within the boards expectations, and the lending is performing well in comparison with high street banks.
GBP/USD is in the red as traders await the result of the Conservative Party leadership race, and the winner in turn will be the next Prime Minister of the UK. Boris Johnson is tipped to take the top job, and given that the prospect of a no deal Brexit is more likely under a Johnson government, currency dealers are a little nervous.
Visa (NYSE:V) will be in focus today as the company will reveal its full-year. Traders have high hopes for the firm as the share price hit an all-time high yesterday. In the second-quarter, group revenue increased by 8% to $5.49 billion, topping forecasts fractionally. The US is the firm’s largest market, and the region registered a 7.9% increase in payment volume.
We are expecting the Dow Jones to open 79 points higher at 27,250 and we are calling the S&P 500 up 8 points at 2,993.
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