European stock markets are subdued this morning as traders are in two minds about the solid US non-farm payrolls report that was released on Friday.
The fact the update was by-and-large positive, has silenced some of the dealers who were calling for the Fed to cut interest rates this month, while on the other hand a good set of employment numbers is good for the US economy. It is possible that traders are waiting for the US session to get underway as today will be the first proper trading day in light of the US jobs report, as some US based dealers were on holidays on the Friday after Thursday’s Independence Day celebrations.
Deutsche Bank (DE:DBKGn) shares were in demand this morning after the bank revealed a major overhaul of the organisation which includes the cutting of 18,000 jobs. The stocks has now turned lower on the session. In a bid to try and turn around the group, the firm is making serious cuts to its trading divisions, and the equities and bond trading teams will be hard hit. The company will pull out of global equity sales and trading. Recently there was chatter the finance house will reveal plans to great trim down the size of its dealing divisions, and now it has been delivered. The German lender has been struggling in recent years, as previous restructuring was schemes weren’t severe enough, and the bank was continuously haunted by ghosts of the credit crisis.
Schroders (LON:SDR) have been hit by a double downgrade as Barclays (LON:BARC) cut their rating on the company to equal weight from overweight. Jefferies lowered their outlook to hold from buy, and it trimmed the price target to 3,100p from 3,587p.
Imperial Brands (LON:IMB) shares are higher this morning after the group revealed a share buyback scheme of £200 million. The group also reaffirmed that that this year’s dividend would be upped by 10%, and next year it would move to a progressive dividend policy. The group has plans to increase investment in e-cigarettes and vaping products in a bid to keep up with the change in trends. The increase in returns to shareholders is a clear sign the company is confident in its outlook, and if the recent upward move continues it might retest the 2,200p area.
EUR/USD hasn’t moved much this morning even though the currency bloc posted some mediocre economic reports. German industrial output increased by 0.3% in May, while the consensus estimate was 0.4%. The eurozone sentix investor confidence index dropped to -5.8 – the lowest reading since 2014. The regions problem persist, and the speculation of monetary easing from the European Central Bank (ECB) is likely to continue.
US banks like Wells Fargo (NYSE:WFC) and Citigroup (NYSE:C) will be in focus today as both have large lending operations and the respectable jobs report on Friday has tempered attitudes towards the Federal Reserve cutting interest rates this month, and that should give the banks a boost as they have a higher earnings potential in a higher interest rate environment.
We are expecting the Dow Jones to open 77 points lower at 26,845 and we are calling the S&P 500 down 7 points at 2,983.
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