Trade and political tensions are weighing on stock markets this morning. The attack on two oil tankers in the Gulf of Oman has ramped up tensions, in an already politically volatile part of the world. Meanwhile, the US-China trade standoff is still simmering away in the background. The International Energy Agency cut its projection for oil demand to its lowest level in two years. Oil can be a good proxy for the health of the global economy, and if demand is tipped to fall, it’s viewed that worldwide demand will dwindle, and that is hitting equities.
There were some mixed economic reports from China this morning. The industrial production report was 5%, which undershot the 5.4% forecast, and the fixed asset investment reading was 5.6%, and economists were expecting 6.1%. On the bright side, the retail sales report was 8.6%, which topped the consensus estimate of 8.1%. It appears that domestic demand is firm as the retail sales numbers were robust, but heavy industry in China is still on its course of slowing down. The major miners like BHP Billiton (LON:BHPB) and Glencore (LON:GLEN) are lower on the back of the updates, as China’s demand for minerals is likely to cool.
Sthree announced a respectable set of first-half figures as net fees jumped by 9%. The UK and Ireland operation revealed a 9% decline in fees, but Continental Europe and the US registered a 13% increase in fees. The firm blamed Brexit uncertainty for the underperformance of the British and Irish operations, but UK unemployment is at multi-decade lows and the Irish jobless rate is at the lowest rate since the credit crisis, but there is some evidence that investment has slowed on account of Brexit.
Kier Group (LON:KIE) shares have sold-off sharply this morning on reports the company is looking to sell its house building division as a part of it restructuring plan. Last week, the stock was clobbered after the struggling group announced a profit warning, and today the talk of the asset sale confirms the weakened state of the firm. The company gets tarred with the same brush as Carillion and Interserve (LON:IRV) as it is in the same sector, but in reality, Kier is in stronger position that some investors fear.
EUR/USD is slightly higher as there is continued weakness in the US dollar, and that has propped up the single currency despite the less that impressive French inflation figures. French CPI in May came in at 0.9% and traders were expecting 1.1%. The April report was revised higher to 1.3% from 1.1%.
Broadcom (NASDAQ:AVGO) shares will be in focus today after the company reported disappointing second-quarter-figures yesterday. Revenue for the period was $5.52 billion, which undershot the $5.68 forecast. The group’s semiconductor unit is its largest division, and its revenue was $4.09 billion, and traders were expecting $4.18 billion. The group lowered its guidance in light of the Huawei ban, and it now anticipates full-year revenue to be $22.50 billion, while equity analysts were anticipating $24.31 billion.
We are expecting the Dow Jones to open 51 points lower at 26,055 and we are calling the S&P 500 down 6 points at 2,885.
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