Equity markets are muted today as the lacklustre session in Asia overnight has spilled over into Europe. Tensions in relation to trade and the Iranian situation still persist, and they are hanging over stock markets, and dealers are looking ahead to Wednesday’s Federal Reserve meeting. There has been a lot of speculation that the US central bank will cut rates this year, and some investors are playing the wait and see game.
Babcock (LON:BAB) confirmed it received an ‘unsolicited and highly preliminary proposal’ from Serco Group (LON:SRP) in late January. The bid was rejected and no other offers have been made since then. Babcock’s shares are higher this morning on the back of the announcement as even the mention of a merger has made trader’s ears prick up. This isn’t the first time that Serco have made a play for Babcock, and some investors feel it might not be the last.
Lufthansa (LON:0H4A) shares sold-off sharply on the back of it lowering its earnings guidance. The airline now predicts full-year earnings growth of between 5.5% and 6.5%, which is still respectable, but the previous forecast was for growth of between 6.5% and 8%. The airline cited intense competition and aggressive cuts to fares from low-cost carriers for the reason behind the trimming of the profit guidance. The airline sector has struggled in 2019. Fuels costs rallied in the first few months of the year, and consumers have gotten used to promotional offers, and in a race to the bottom in term of fares, it helps the consumer but not the shareholder.
Kier Group (LON:KIE) shares had a volatile start to the day. The company revealed a restructuring plan ahead of schedule as the struggling group had originally planned to compete the strategic review by July. The firm suspended its dividend and announced 1,200 job cuts, and it hopes to deliver cost savings of £55 million from the full-year 2021. The review found that debt levels were too high, and there wasn’t enough of a focus on cash generation, and the group will sell-off non-core businesses. The firm issued a profit warning on Friday, and this morning’s update hasn’t reassured investors as the stock is lower again. Traders are likely to remain nervous until the restructuring scheme stars to bear fruits.
Deutsche Bank (DE:DBKGn) announced plans set up a €50 billion bad bank. There is sense of déjà vu as the bank continues to muddle along as the pervious waves of restructuring still haven’t fixed its problems. It is speculated that the finance house will trim down its non-core assets, and other parts of the business will be restructured. Deutsche Bank’s failed merger attempt with Commerzbank (DE:CBKG) left it scrambling around for other schemes to try and halt the share price decline.
The US dollar index has barely moved today, and in turn there has been little movement in GBP/USD and EUR/USD.
Bitcoin topped $9,000, its highest level since May 2018 on reports that Facebook (NASDAQ:FB) are looking to launching their own cryptocurrency. The fact that a titan of tech are moving into the area adds credibility to the sector as a whole and that is boosting bitcoin.
Chewy (NYSE:CHWY) will be in focus today as Friday was its first day on the stock market. The US stock opened at $36 per share but finished slightly lower at the end of the trading session.
We are expecting the Dow Jones to open 51 points higher at 26,140 and we are calling the S&P 500 up 6 points at 2,893.
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