It’s been another mixed session for Asia markets with the Nikkei closing higher, after rebounding off trend line support from the 2016 lows, while Chinese markets slid back.
European markets have taken their cues from this with the DAX opening higher, while the FTSE100 opened slightly lower.
It’s not been a great few months for British American Tobacco (LON:BATS) shares, down over 30% this year alone, despite the fact it has in the past been a safe haven staple for yield starved investors. Unfortunately for its shareholders, the regulatory environment for tobacco products has become extremely onerous over the last few years, while smoking rates have been in decline for quite some time which has hurt revenues.
Against that backdrop the company has warned that revenues from its smoking alternative products are likely to miss expectations for this year, due to a slowdown in Japan for vaping products.
Despite this slowdown revenue from vaping is still expected to rise by more than 10%, however the company has warned that adverse currency shifts will hurt its full year numbers by about 7%, as management look to justify falling short of expectations. This seems a rather high number given how stable currencies have been the past few months, unless the hit has come from its exposure to emerging market currencies.
Alton Towers and Legoland owner Merlin Entertainments (LON:MERL) also updated the markets today with its numbers over the summer trading period. The long hot summer should have been conducive to some very good numbers, as the company put to one side the negative effects of last year’s terror attacks.
Overall revenue over the summer period to the beginning of October saw a rise of 4.7%, driven primarily by new business growth, and said that it expected results this year to meet expectations. This comes across as rather disappointing given the good weather this summer, and the number of people who probably stayed at home for their annual break this year. It would appear that markets agree, with the shares sharply lower. While the company was keen to stress that cost environment was a challenging one, due to increases in the living wage, the fact that the company has merely met expectations given the great summer weather is rather disappointing.
UK house builder Bellway (LON:BWY) Homes has also reported its latest full year numbers, with revenues in line with expectations at £2.96bn and a pre-tax profit of £641.1m. Over 10,000 homes were completed last year, with another 4,800 in the pipeline, for the current financial year.
Oil prices have slipped back as US Secretary of State Mike Pompeo lands in Riyadh to meet Saudi King Salman to discuss the disappearance and possible murder of Saudi journalist Jamal Khashoggi. Saudi Arabia appear to have resiled from an implied threat to weaponise the oil price, nonetheless the damage may well have been done. With so much in the Middle East politics dependant the Saudi’s will be keen to keep the US on side, particularly given both sides difficult relationships with Iran. Neither side will want this standoff to escalate into anything more serious but for Saudi Arabia the pressure is growing for them to offer an explanation to what is a horrific story.
Volvo (LON:0HTP) shares have slid 9% on the open after warning of an emissions component problem on some of its lorries which could cause them to emit higher than legally allowed levels of nitrogen oxide. The cost of remedying the problem could be in the millions of kroner, and with no accurate estimate of how many vehicles the problem may affect the shares have dropped to a one year low.
The US earnings story is set to continue today with the latest numbers from Netflix (NASDAQ:NFLX). In July the company surprised the markets by missing its target for subscribers by about 1m. We’ll find out later today whether this was a one-off due to the long hot summer keeping people outside as opposed to indoors binge watching episodes of the Crown. Earlier this week Goldman Sachs (NYSE:GS) downgraded its price target for the streaming giant.
Expectations are for 5m new subscribers for this quarter, however even at this rate of growth the amount of spend on new content, currently at $13bn will continue to outstrip the pace it adds new users. At some point something will have to give even as the company continues to face increased competition from the likes of Disney, Amazon (NASDAQ:AMZN) Prime, as well as Apple (NASDAQ:AAPL), HBO and Warner Bros who are all looking at ramping up their own streaming offerings.
Dow Jones is expected to open 65 points higher at 25,315
S&P500 is expected to open 9 points higher at 2,759
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