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Europe Drifts Higher Ahead Of ECB And UK Election

By CMC Markets (Michael Hewson)Stock MarketsDec 12, 2019 10:42
uk.investing.com/analysis/europe-drifts-higher-ahead-of-ecb-and-uk-election-200435337
Europe Drifts Higher Ahead Of ECB And UK Election
By CMC Markets (Michael Hewson)   |  Dec 12, 2019 10:42
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European markets have got off to a positive start this morning taking their cues from last nights Fed meeting, however trading is fairly light ahead of this afternoon’s ECB rate decision and today’s UK election.

It’s been a tough couple of years for Purplebricks (LON:PURP) as new CEO Vic Darvey attempts to turn the business around. Last month the company reported it had returned to profit, with revenues expected to come in flat, compared to a year ago. Management also said they expected to maintain market share at 4%, while its business in Canada is also performing as expected.

Today’s trading update showed a modest rise in revenues to £64.8m, a rise of 1.9% on a proforma basis, while the company slipped to an operating loss of £1.2m, dragged down as a result of costs around the discontinued businesses in the US and Australia.

Margins slipped to 60.8% from 62.1%, highlighting perhaps the challenges in the UK housing market over the last few months, where the company derives 73% of its revenues.

Ocado (LON:OCDO) has seen some decent gains this year despite fires at two of its distribution warehouses that hit its output earlier this year. In July management put the cost of the fires at more than £100m. despite this management have continued to ramp up their growth plans and this morning’s update from Ocado Retail, their joint venture with Marks and Spencer (LON:MKS) has seen retail revenues rise by 10.8% to £429.1m while average orders per week have increased from 317k a year ago to 350k, a rise of 10.4%.

Construction giant Balfour Beatty (LON:BALF) has continued to go from strength to strength under the guidance of Leo Quinn. Since he took over in 2015 the focus on higher margin business has paid dividends and despite taking a hit from the Carillion fall out the business has continued to look solid, though like the rest of the construction sector its share price has suffered as a result of the ongoing uncertainty around the UK economy and the Brexit deadlock.

Today’s trading update has shown that revenues are on course to rise 5% from last year, while the order book is in excess of £14bn, without the inclusion of any work on HS2. Profits are expected to come in slightly ahead of expectations while cashflow has also continued to improve to £310m, well above last years levels of £194m and above previous guidance.

While the outlook for Balfour remains encouraging, Costain Group shares have plunged after the company announced that it was adjusting its full year profit guidance down to £17m to £19m after an arbitration ruling on its A465 contract with the Welsh government, ruled against the company in terms of the responsibility over design problems, that have dogged the project. The company has said the amendment to the ruling would impact their cash position to the tune of £40m.

In terms of the order book, that has remained steady at £4.2bn, however that sum does contain work for HS2, which may well be impacted by changes in that particular project, dependant on who wins the election.

Earlier this year Julian Dunkerton managed to regain his place on the Superdry board, prompting the existing board to resign en masse.

Since then the shares have broadly traded sideways as investors weigh up whether he can deliver a plan to turn the business around. In May the company posted yet another profits warning, the third one in 12 months, and while there are some signs of a recovery, this year is likely to be a period of consolidation.

Today’s half year report shows that total group revenue fell 11% to £369.1m with a loss before tax of £4.2m, while underlying profits fell 98% to £0.2m. Margins did improve over the period but these we undone by currency movements, as well as stock accounting changes.

The company has booked charges in relation to inventory of £3.1m, as well as £6.9m in relation to bad debts.

The UK goes to the polls today as voting gets underway with the pound remaining steady as markets look to the next event risk, which will be tonight’s exit poll, when we’ll get early indications which way voters have jumped, in terms of their next choice for UK Prime Minister.

The US dollar has slipped back over the last 24 hours with the euro hitting a one month high ahead of today’s ECB rate meeting, where the main focus will be on new ECB chief Christine Lagarde’s first press conference. How dovish will she be and how does the governing council see the recent improvement in some of the latest European economic data, and whether it signals a sustainable rebound.

US markets look set to open higher in the wake of last nights Fed announcement, with US weekly jobless claims set to rise 10k to 213k.

Dow Jones is expected to open 35 points higher at 27,946

S&P500 is expected to open 4 points higher at 3,145

"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "

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Europe Drifts Higher Ahead Of ECB And UK Election
 

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Europe Drifts Higher Ahead Of ECB And UK Election

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