Markets are mixed this morning as traders are preparing themselves for a continuation of the Brexit saga. Boris Johnson hopes to hold a vote on the withdrawal agreement bill today, but that could open up the possibility of MPs adding amendments in relation to customs or about the possibility of a confirmatory referendum.
Dealers are concerned this process will drag on, hence why stocks are mixed this morning. The optimism of last week about the prospect of a deal being approved has been replaced by a sense of fatigue.
Prosus launched a £4.9 billion bid for Just Eat (LON:JE). The offer made by Prosus represents a 20% premium above the Takeaway.com offer for the London-listed firm, but a short while ago Just Eat knocked back the bid. Just Eat Group claims the offer doesn’t reflect ‘significant future upside’, and the group feels its prospects with Takeaway.com are better. The food delivery business is undergoing rapid expansion, which has led to an increase in consolidation. Earlier this year Deliveroo knocked back an offer from Uber (NYSE:UBER) Eats, so it is clear the plates are shifting in the sector.
Reckitt Benckiser (LON:RB) shares are lower this morning as the company now expects full-year like-for-like revenue growth to be 0-2%, while the older forecast was 2-3%. This the second time the guidance has been lowered this year as it trimmed the outlook to 3% from 4%. The group foresees a modest decline in adjusted operating margin too. Reckitt admitted it underestimated the integration of Mead Johnson into the group. There is a ‘tough operating environment’ in China, which is likely to last seeing as the economy has slowed to levels last seen in the early 1990’s. Consumer confidence around the globe is becoming more fragile so Reckitt could be in for a tough time in the medium term.
Travis Perkins (LON:TPK) has decided to put the sale of its plumbing and heating business on hold on account of ‘unprecedented level of uncertainty’. The group wanted to sell-off the unit as a way of freeing up cash plus cutting costs. The uncertainty in the construction business on account of Brexit has put a stop to that plan for now, presumably the group feels it wouldn’t get a fair price for the division in the current environment. It’s better to play the long game, rather than desperately sell at reduced price. Despite the change of plans, the firm still expects to achieve its cost cutting target of £20-£30 million by mid-2020. The stock is fractionally higher today.
GBP/USD hit a five month high yesterday as traders were hopeful about the Brexit situation. Sterling has slipped a little today as traders are less hopeful that progress in relation to Brexit will be made. The political games at Westminster might drag on, so dealers are trimming their sterling positions. UK public sector net borrowing last month edged up to £8.7 billion, but it was below the £8.8 billion forecast.
McDonald’s (NYSE:MCD) will be in focus today as the company will announce its third-quarter results. In July, the firm posted a solid set of second-quarter results which pushed the stock to a record high, and it hit another all-time high in August. At the last quarterly update, US same store sales jumped by 5.7%, which comfortably topped the 4.5% forecast. Promotional offers were cited for the impressive performance in the US. Traders will be watching closely to see if the sales momentum can be maintained.
We are expecting the Dow Jones to open 3 points higher at 26,830 and we are calling the S&P 500 unchanged at 3,006.
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