While markets in Asia fell sharply, as they played catch up to yesterday’s falls, European stocks have stabilised this morning as investors wait for the next shoe to drop in the tit for tat tariff war between the US and China.
It would appear that for now the US may well hold back from implementing further tariffs on $325bn worth of Chinese goods after President Trump suggested that a deal could come in the next three to four weeks.
On the earnings front it’s another big day for company announcements.
Vodafone (LON:VOD) saw its share price fall quite sharply yesterday on speculation that we might see a dividend cut when the company released its full year numbers this morning.
This speculation proved to be rather prescient as the company announced it would be doing just that, cutting its full year dividend by €0.06c to €0.09c, after full year revenues missed expectations, coming in at €43.67bn, well below expectations of €45.17bn, and sending its shares to a ten year low.
The dividend cut wasn’t entirely unexpected given the rising costs of rolling out its 5G network which has already cost the company €5.4bn. The company also announced that its 5G network would go live on 3rd July this year across 7 cities in the UK and that it is the costs of rolling out and upgrading its network that appears to have prompted the decision to cut the payout.
In an attempt to maintain control of this rising debt the company announced the sale of its New Zealand unit yesterday for $2.2bn.
German chemicals giant Bayer (LON:0P6S) must be ruing the day they decided to buy Monsanto (NYSE:MON) after a jury in California awarded $2bn of damages to a couple who claimed that they got cancer as a result using the Roundup weed killer. This is the latest class action trial that the company has lost in succession and is likely to face further claims in the months ahead, with the costs only likely to mount up.
The company rebuts the findings of the courts and has said it will appeal but the damage to the share price in the last 12 months would appear to reflect investor concern that the cost of settling these claims is likely to spiral into the billions of US dollars, with the share price down over 40% from a year ago, and likely to fall further until there is clarity on how high the final costs are likely to be.
Managements refusal to try and settle the claims appears to be rattling investors, particularly since the refusal to engage is likely to result in further findings against the company, and as such further punitive damages. The optics of not sitting down and refusing to settle is only likely to result in further punitive rulings in the months ahead.
Commercial property and real estate has been under pressure for a while now, as retailers across the country close shops and press for rent reductions in the face of declining footfall on the High Street.
This is now trickling down into the margins of landlords with Land Securities Group PLC (LON:LAND), who run Bluewater in Kent, reporting that losses grew in its latest full year numbers, with the company making a loss of £123m, up from a £43m loss a year ago.
On the plus side revenues increased by 8.9% to £442m but the company warned that rents were likely to fall further across its retail park and shopping centre portfolio over the next 12 months.
UK consumers penchant for coffee, bakery, sausage rolls, vegan or otherwise, as well as sandwiches appears to be padding out the waistline for Greggs (LON:GRG), which has once more posted a strong trading update for the first 19 weeks of this year.
Total sales rose 15.1%, a rise of 4.7% over the same period a year ago, while overall stores opened rose by 16, with 38 new stores opened and 22 closed.
Management expressed their expectation that underlying profits were likely to be materially higher than previous expectations, sending the shares up over 13% to a new record high.
US markets look set to rebound as well after their biggest one day falls this year, following on from the current rebound in Europe. President Trump’s more conciliatory tone has offered confidence that any escalation in the short term is likely to be limited, while both sides consider their next moves.
Interest rate markets are also starting to price in the prospect that the Federal Reserve might well start cutting rates before the end of this year.
While this remains unlikely markets are assigning a much higher probability of it happening than perhaps is justified. We could well get some extra colour on that later today when Esther George, head of the Kansas City Fed speaks in Minneapolis.
Dow Jones is expected to open 76 points higher at 25,400
S&P500 is expected to open 10 points higher at 2,821