Renewed fears about the US-China trade dispute and the state of Italian politics has shaken European equity markets. Now that the US has wrapped up its North American trade deal, it can focus on readdressing the trading imbalance with China. The latest trade figures from the US showed its deficit increased, and that will play on President Trump’s mind.
The administration in Rome are set to be on a collision course with Brussels over the proposed size of its deficit. Traders are worried that Italy might be aiming to exit the euro and or the EU, but Luigi Di Maio, one of the joint Deputy Prime Ministers denied those claims this morning. The political rumbling in Italy is weighing on their banking sector due to its exposure to the Italian government bond market.
Ferguson (LON:FERG) shares are in the red after the company released solid full-year figures, but warned that conditions are ‘tough’ in the UK. The group posted a 15.3% rise in profit and revenue rose by 7.6%. The US division generates 90% of its profit, and the operation had a ‘particularly strong year’. The firm continues to be generous to shareholders as the final dividend was hiked by 21%, and a special dividend of $4 per share was announced in June. The stock has been in a solid upward trend for over two years, and while it holds above the 6,000p mark its outlook could remain positive.
Royal Mail shares (LON:RMG) are the red again after the company issued a profit warning towards the end of trading yesterday. The company said they expect their full-year performance to be ‘significantly’ below target, and conditions were described as ‘challenging’. The stock has been in a downward trend since May and it has fallen to a level not seen since October 2013 – when the company floated. If the bearish move continues, it could target 330p.
Meggitt (LON:MGGT) were awarded a $323 million contract with a US defence agency. The agreement will run for five years and there is an option for a further five year extension. The market has been pushing higher since April, and if the bullish move continue it could target the 590p region.
GBP/USD is under pressure due to political uncertainty surrounding Brexit. Yesterday we heard the UK government is willing allow checks in the Irish Sea ,and this morning, Arlene Foster, the head of the DUP reiterated her view that it would not be acceptable to her party. Seeing as the DUP are propping up the Conservative Party, they could make life difficult for Mrs May.
EUR/USD is lower due to the firmer US dollar and the even though the eurozone PPI rate came in at 4.2% in August, the euro still lost ground versus the greenback.
We are expecting the Dow Jones to open down 101 points at 26,550 and we are calling the S&P 500 down 10 point at 2,914.
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