The inability of US markets to significantly build on the gains of last week appears to have prompted some profit taking in Asia and European markets in today as tensions between the US and Iran escalate even further after the US extended sanctions to key officials in the Iranian government, including the supreme leader.
Iran responded by saying that the prospect of a diplomatic solution was now closed forever, raising the prospect that further escalations could follow, calling the White House “retarded”. Somewhat perversely oil prices have slipped back, despite this ratcheting up of tension.
On the subject of this weekend’s G20 and the proposed meeting between President’s Trump and Xi there is some optimism that further tariffs might be avoided in the hope that talks can restart in earnest. While not exactly the trade deal we were promised a few months ago at least there is the prospect that things might not get any worse. Talk about shifting expectations.
In further signs of the shifting sands of investor sentiment gold prices have once again hit their highest in six years, above $1,435, while German 10-Year yields have hit another record low of -0.33%.
Cryptocurrencies are also feeling the benefit of record low yields attracting some capital flow as bitcoin makes another one year high above $11,000.
In company news BT Group (LON:BT) announced this morning that it had begun talks to pull out of Spain, as well as a significant restructuring of its Global Services business, as it looks to streamline and simplify the business.
This is the business that has been on the front line of the Italian accounting scandal.
Having restructured its business a year ago Carpetright (LON:CPRC) appears to be making progress on turning around its operation. Although losses came in at £24.8m recent trading appears to show light at the end of the tunnel, with CEO Wilf Walsh expressing optimism that the business is on the right track and that despite a difficult retail environment, like for like sales numbers are improving markedly.
In its latest trading update oilfield services provider Petrofac (LON:PFC) said that it was trading in line with expectations, despite challenges in its operations in Saudi Arabia and Iraq, as it updated investors on the first half of its financial year. The higher oil price may well go some way to offset the shortfall from a slightly reduced order book, for this financial year, however that hasn’t stopped the share price from falling sharply in early trading.
US markets look set to take their cues later today from the softer tone in Europe with earnings numbers from Fedex and Micron set to be in focus.
Micron Technology (NASDAQ:MU) is set to update investors with its latest Q3 update. Chip makers and semiconductor stocks have been at the centre of the trade storm unfolding between the US and China in recent months as the impact of tariffs hits their global business model. The recent downgrade by Broadcom (NASDAQ:AVGO) has only served to amplify these concerns and with Micron chips a big seller to China’s Huawei, accounting for 13% of its revenue, we could well see a significant miss, as well as a possible downgrade coming in these latest numbers. Profits in the coming months are also likely to be significantly lower, unless the company can offset the loss of the Huawei business elsewhere. Q3 profits are expected to come in at $0.81c a share.
FedEx (NYSE:FDX) is also set to round up its financial year end with its latest Q4 update. The decline in Fedex share price in recent weeks probably reflects a concern that a slowing global economy will drag on revenues and profits. It was a worry earlier this year, particularly in China as well as the US, with China sales data at 16 year lows, and there were differing signals being given out when it comes to official US retail sales data, when compared to the upbeat sales numbers being reported by the likes of Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN).
In recent months the US retail sales numbers have picked up which should be a good thing for FedEx numbers. In Q3 their numbers missed expectations, and downgraded their profit expectations, citing global factors, and a weak Europe. Another downside this quarter is that it found itself caught up in the US, China trade spat after being accused by Huawei of deliberately misrouting two packages from Japan that were supposed to go to China, but ended up in the US. Profits are expected to come in at $4.90c a share.
Dow Jones is expected to open 12 points lower at 26,715
S&P500 is expected to open 3.5 points lower at 2,941.5
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