Asia markets took their cues from yesterday’s losses in Europe, however today's European session has been slightly more mixed, with the FTSE 100 lagging behind the rest of Europe, due to a slightly stronger pound acting as a drag on its main US dollar earners.
The sudden new belligerence from the US appears to have caught markets slightly off guard, with the US also threatening to increase EU tariffs further after the WTO ruled in favour of the US with respect to EU claims that all illegal subsidies had been removed.
The goods targeted are likely to include products from the UK, as well as France, Germany and Spain. The Trump administration also proposed the imposition of 100% tariffs on French goods like wine, cheese, jewellery, handbags and make-up in retaliation for France’s proposals to target US technology companies in the form of a digital tax.
French luxury goods stocks are also lower with LVMH (PA:LVMH), Kering (PA:PRTP) and Hermes (PA:HRMS) all under pressure on fears over US tariffs.
Plumbing and heating provider Ferguson's (LON:FERG) latest Q1 trading update showed that once again a strong performance from its US business was helping underperformance in its UK operation. Management have said that the demerger of the UK and US businesses was on track. Revenues were up 5.3% to $5.21bn with the US business providing $4.89bn of that. Trading profit was $451m less an $18m provision in respect of IFRS16.
The UK business saw revenues fall 2.2% to $541m while trading profits fell to $15m, from $19m.
At a time when streaming applications are gaining in popularity the traditional cinema experience appears to be becoming less and less popular. This is a shame at a time as the big screen experience offers something that is hard to replicate on a portable device. Then again when the alternative is someone munching on smelly food while you are trying to immerse yourself in a big screen 3 or 4D experience then perhaps streaming providers like Amazon (NASDAQ:AMZN) Prime AND Netflix (NASDAQ:NFLX) have their attractions after all.
Today’s latest trading update from Cineworld (LON:CINE) would appear to reflect that, as the company said that it expected full year earnings to come in slightly below forecasts. Management put this down to a slow start in the first half, though there it is quite likely that we will see a pickup in the second half as more people go and see Frozen 2, while the latest Star Wars film, the Rise of Skywalker could well pick up the slack in the next few weeks. Takings for Frozen 2 saw a Thanksgiving record in the US, and as such Cineworld is likely to reap the benefits of that along with the latest Star Wars film which is also set to be another blockbuster.
Revenues for the group year to date declined by 9.7%, with Box Office revenues down 12.8%. The company did say that the US refurbishment program was progressing well with synergy savings expected to come in higher at $190m, better than the original estimates of $150m.
Italian bank UniCredit (LON:0RLS) is centre stage this morning after announcing a €2bn buyback as well cutting 8,000 jobs. It only recently announced that it was cutting its stake in its Turkey operation Yapi Kredi which resulted in a loss of €1bn. Unicredit (MI:CRDI) has been no stranger to taking steps to underpin the business in recent years. Over the last decade its shareholders have been diluted on at least three occasions as the bank has raised capital to save and restructure itself, and yet here we are two years after the last capital raising, and the bank is still trying to resuscitate the business.
While the decision by management to pay back a percentage of profits to shareholders though welcome news in terms of shareholder return, one has to question as to whether it is the best use of capital at a time when the whole sector is battling slowing growth and low to negative interest rates.
Ocado (LON:OCDO) shares have continued to come under pressure after yesterday’s announcement of a £500m convertible bond.
The pound appears unperturbed ahead of the start of today’s NATO summit, trading near to the top of its recent trading range, despite a disappointing head line retail sales number earlier this morning from the British Retail consortium which saw like for like sales in November plunge 4.9%. Looking a little more closely, due to the timing of Black Friday last year, the numbers look worse than they actually are. Including Black Friday for this year the numbers actually saw a rise of 0.9%, against a 12 month average of 0.2%.
US markets look set to rebound modestly later today after the S&P500 posted its biggest decline in almost two months. We could see some investors use this opportunity to buy back in again in anticipation that this latest flare up is merely another negotiating ploy by US officials.
Dow Jones is expected to open 40 points higher at 27,823
S&P 500 is expected to open 4 points higher at 3,118
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