After the big declines seen yesterday it’s been a subdued start for markets in Europe this morning as investors take stock with respect to the next moves in the US, China trade talks.
The news that President Trump and Xi won’t be meeting before the March 1st deadline for an increase in tariffs, has raised concerns, in the absence of another extension to the trade truce, that the global economy will struggle to absorb further costs on goods and services.
Against a backdrop of slowing growth and lower forecasts its certainly unwelcome that President’s Trump and Xi won’t be meeting in the next couple of weeks, however it doesn’t mean that we won’t see another tariff suspension in order for talks to continue, and that might be something that investors might be able to hang their hats on when China returns from its Lunar New Year holiday.
The Reserve Bank of Australia followed up its dovish tilt earlier this week by taking an axe to its growth forecasts for the Australian economy, becoming the latest in a line of central banks to warn about an economic slowdown.
In a rare dose of good news this week, this morning’s latest German trade numbers showed an improvement in both imports and exports for December, while industrial production in France also rebounded after a poor November. Sadly there was no December rebound for Italy which saw industrial production sink 0.8%, with work day adjusted output falling at its fastest rate since December 2012.
This morning’s numbers from French luxury brand Hermes shows that for all the doom and gloom around China there are still some bright spots, as revenues rose by 9.6%, largely driven by sales of its Birkin bags, while sales in e-commerce also played a part, growing at a faster rate than any other geographic region.
Energy company SSE (LON:SSE) announced their latest Q3 numbers this morning, cutting guidance from 70-75p three months ago to 64p to 69p due to the recent judgement by the European Court of Justice ruling which they hope will only be temporary removal of the European Commission’s state aid approval of the GB capacity market scheme.
Management said that the ruling would reduce income by about £60m and this has seen the shares fall in early trading, while an update on the company’s retail arm would come at the end of March, when the option to spin it off might well be considered.
Royal Bank of Scotland (LON:RBS) shares have continued to look soft after yesterday’s reports that the UK government was considering selling off another sizeable stake in the bailed out bank, ahead of next week’s full year results, when the bank is expected to its biggest annual profit since it was bailed out over ten years ago.
UK bookmaker William Hill (LON:WMH) shares have come under pressure in the last couple of days as concerns grow that revenues could take a sizeable hit if the shutdown of UK horse racing, due to the equine flu outbreak, continues for an extended period of time.
The pound continues to hold up fairly well, despite rising concern that the UK is heading for a “no deal” Brexit, as Prime Minister Theresa May heads for Dublin to discuss the vexatious issue of the Irish backstop in an attempt to get a time limit put in so that it has a chance of getting passed through the UK parliament.
While US markets also closed lower yesterday, they did manage to close off their lowest levels of the day, however US investors are still likely to remain cautious.
Dow Jones is expected to open 70 points lower at 25,099
S&P500 is expected to open 7 points lower at 2,699
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