FTSE waits to breathe
London’s blue chip index is flirting with the flat line this morning as Britain awaits a decision by the EU on an extension to the Friday Brexit deadline. Tesco’s better than expected profit and consequent rally went some way towards support the index.
Although PM Theresa May asked only for a delay until 30 June EU leaders are expected to propose a longer extension either until the end of 2019 or March next year at a European summit later today. Sterling is reflecting the full cautiousness of the market and concerns that the PM may not be in the position to accept a long delay for fear of a rebellion within her own party.
The pound is trading within a few pips range but in positive territory against the dollar and the euro, waiting for further signals which will be supplied later in the day when the European Central Bank meets and when the Federal Reserve releases its latest minutes.
IMF cuts US growth forecast
The Fed’s minutes are expected to provide little by way of surprise as the main outline of the central bank’s decision has already been made public: no rate hike at the moment and no rate hikes throughout the year. What would be interesting for investors is any analysis on the economic effects on the US-China trade dispute on the US economy, particularly as the US is planning to intensify its trade restrictions on Europe over the EU’s support of Airbus. If a WTO arbiter gives a green light this summer this could see tariffs imposed on over $11 billion worth of European goods.
The dollar market is also barely breathing with the greenback trading marginally lower but in a very thin range as the extent of the US economic slowdown becomes clearer. The IMF has significantly cut its projections for the US economy this year, saying it expects it to grow at a pace of 2.3% this year rather than the initially predicted 2.9%.
New London IPO
London had its biggest IPO this year as payments processor Network International started trading. The company raised GBP 1.1 billion pounds with its listings having sold 200 million shares at 435 pence each. Shares in the Dubai-based firm had a good start, rallying 16% in the early bout of trading.
Network International is the first large scale listing this year as many investors have shied away from London because of Brexit.
ASOS (LON:ASOS) growing pains
ASOS's growing pains have been laid bare in this earnings announcement, which provides investors with more colour on the execution risks facing the business.
To be fair, the company is navigating a tough retail environment, though even management has admitted that it hasn't always gotten it right on pricing, marketing, inventory management and staffing levels.
ASOS had already announced last month that it was unable to cope with an unexpected surge in demand at its new US business. Today, management has revealed that the issue was related to a staffing shortage, rather limited technical capabilities.
ASOS has since nearly doubled staff levels at its Atlanta warehouse to 1,532 but not before its customers were subjected to a four-day delay on their deliveries. Online retailing is hyper-competitive and any more hiccups like this will be hard to forgive.
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