European bourses are all trading higher this morning on the back of strong company earnings, particularly in the banking sector and the DAX is benefiting from unexpectedly strong manufacturing PMI data. The FTSE is up by 0.11%, gaining less than others as the pound is struggling to hold its ground amid uncertainty over the UK’s Brexit course.
Miners higher, oil stocks fall
The war of words between President Trump and the Iranian president Hassan Rouhani continues to percolate in the background lending support to Brent crude prices which continue to move higher albeit at a much slower pace than Monday when prices jumped 1%. The lid on the oil price is being kept there by Trump’s tariff dispute with the USA’s main trading partners as tariff talk keeps fears alive that the global trade conflict will escalate and ultimately destroy some oil demand. Also, three oil producing heavy weights: Russia, Libya and Saudi Arabia are all in the process of increasing production, offsetting any thoughts of an oil shortage and keeping shares in oil companies under pressure.
In contrast, mining companies are doing well irrespective of what kind of metal they are producing, courtesy of President Trump’s comments Monday about the dollar being too strong. Since then the dollar has weakened and has propped up prices of copper, gold and other metals. Consequently, Rio Tinto (LON:RIO), Glencore (LON:GLEN), BHP Billiton (LON:BLT), Evraz (LON:EVRE) and Anglo American (LON:AAL) are high among the FTSE gainers this morning rising between 1.3% and 1.6%.
Pound remains under pressure
The pound is just about holding its ground against the dollar at 1.3118 as the domestic political situation remains precarious and the country’s course over Brexit unclear. With no agreement over how to negotiate the Brexit deal the prospect of a “no-deal” Brexit is beginning to loom, potentially the worst option for business.
Due out later today are the Industrial Trends Survey published by the Confederation of British Industry at 11 and the US Markit flash manufacturing and services PMI numbers due at 13.45.
Outlook for PZ Cussons still challenging
A lot of the bad news was already out for PZ Cussons (LON:PZC), which has met the bottom end of its recently-downgrade profit guidance as expected.
There's no explicit warning that earnings will fall this year and the company has held its annual payout steady, giving it a relatively attractive dividend yield of around 3.8%.
But the outlook PZ Cussons still looks very challenging, particularly in Africa, which is still its biggest business by revenue.
Data released this week showed Inflation growth in Nigeria is continuing to ease, but at 11.2% its consumer price index is still relatively high, even with the a main interest rate at 14%.
PZ Cusson's soap business has a certain defensive quality: people wash when they can. But the company also happens to be one of Nigeria's biggest whitegoods retailers, and spending on things like fridges and washing machines is one of the first thing to get the chop when credit availability is constrained.
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