US markets once again closed at record highs yesterday ahead of today’s annual 4th July holiday, with Asia markets subdued, while markets here in Europe also opening fairly cautiously, on what is likely to be a fairly low key and low volume session in the absence of US trading.
The primary drivers continue to be concerns over further escalations over trade and expectations of additional central bank easing, with President Trump continuing to ratchet up the rhetoric on a number of fronts. Yesterday he took aim at China and the EU for manipulating their currencies, an early warning if any were needed to potential incoming ECB President hopeful Christine Lagarde, of the difficulties she could face if she does take up the post being vacated by Mario Draghi.
UK house builders have been very much in the firing line given the recent slowdown in house prices and despite the well documented shortage of housing, and haven’t probably performed as well as they might since the 2016 Brexit referendum, largely due to a weaker housing market in the last 12 months.
The performance in Persimmon (LON:PSN) share price in recent months is a classic case in point. The company has been in the headlines for all the wrong reasons due to controversy over its CEO’s pay packet, which ended in his departure at the end of last year, with the shares down over 25% in the last year.
Today’s first half trading update from Persimmon bears out this slowdown, with total revenues declining from the same period last year. A decline of 5.6% to £1.65bn from £1.74bn would appear to be as a result lower completion rates of 7,584 new homes, even though average selling prices were slightly higher. Expectations for operating margins for the full year are expected to be in the region of 30.8%
In further signs of a slightly softer housing market forward sales are also below the levels from 12 months ago, down by 3.5% to £1.62bn.
This weakness already looks to be reflected in the share price with the shares trading broadly flat as the market opens.
As retailers go Associated British Foods (LON:ABF) has the luxury of having diversity across its business model, with the owner of Primark, as well as the company behind brands like Twinings tea and Ovaltine, having another decent quarter as it updates the market on the 40 weeks ending 22nd June, with the shares slipping modestly in early trade.
Across the whole business, group revenues are reported to be 3% ahead of the same period last year, though once again the sugar business has acted as a modest drag, due to weaker sugar prices.
In the retail space Primark saw sales growth in the UK rise 4% though much of this was achieved as a result of increased selling space, as comparable sales fell back slightly. After a weak performance in May, trading activity has picked up in June, with new stores doing particularly well.
The US operation has also seen margins improve from 9.8% to 11.7% for the first half of the year as the company continued to grow its business there.
Early movers have seen International Consolidated Airlines Group (LON:ICAG), and Coca Cola HBC (LON:CCH) both drop sharply lower as they trade ex-dividend.
On the currencies front it’s been a fairly subdued 24 hours, with the US dollar holding on to most of its recent gains, while oil prices have come under pressure once more after yesterday’s inventory data showed a much weaker draw than expected in terms of US consumption.
With US driving season in full swing the lower demand from US consumers has raised concerns that the US economy could well be slowing slightly more than expected.
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