It’s been a negative start for markets in Europe this morning, following on from a negative finish for US markets which slipped back over concerns about a slowdown in US economic growth for this year.
The latest Fed Beige Book survey pointed to a bigger than expected slowdown in Q1, largely due to government shutdown related factors with 10 of 12 districts showing weakening economic activity, while dovish comments from New York Fed President John Williams (NYSE:WMB) suggested that US policymakers may well be more concerned about a US slowdown than they may be letting on, when he said that they were prepared to exercise patience in a “new normal” of slower growth.
Coming on the back of reports yesterday that the European Central Bank is considering slashing its growth and inflation forecasts later today with a view to formulating a new stimulus program to help an increasingly sclerotic European economy, and it is becoming clear that whatever deal or otherwise the US and China might be able to arrive at on trade, it probably won’t be enough, to mitigate concerns that the global economy is slowing down.
This is likely to be a taxing problem for ECB President Mario Draghi when he addresses questions on the latest ECB rate decision later today. The ECB is expected to aggressively lower its growth and inflation forecasts with a view to potentially outlining a framework for another TLTRO program. This may well be somewhat premature given that an admission that the European economy needs a new loan program would be tantamount to saying that the ECB was wrong in ending its asset purchase program at the end of last year. It’s more likely that the ECB will extend its guidance about lower for longer rates, as well admitting that they will rollover the existing loan program, when some of the loans expire in June.
Mining stocks in London have taken a big hit after French bank Societe Generale (PA:SOGN) took a scalpel to the mining sector, downgrading Rio Tinto (LON:RIO) to “sell” from “hold” with a price target of 3880p, while also downgrading BHP as well, setting a new price target of 1,680p, an over 5% drop from current levels.
This morning’s decline has seen Rio Tinto lose its entire February gains while BHP has also hit three week lows, though it should also be noted that both stocks are also trading ex-dividend.
Following on from the decent numbers from Legal and General yesterday, Aviva (LON:AV) yesterday announced its own full year numbers for 2018, as operating profits came in at £3.12bn, with assets under management slipping slightly to £116bn, with the company citing weak investment markets, as operating profits in fund management saw an 11% fall to £146m .
Management went on to warn that lower fee income may weigh on operating profit growth in 2019.
In its insurance business the picture was better with an increase in operating profits of 7%, with the company announcing a full year dividend of 30p per share.
The company said it plans to reduce its debt by £1.5bn in order to save £90m per year in interest costs, while confirming the appointment of new CEO Maurice Tulloch
Having finally declared victory last year in its acquisition of GKN (LON:GKN), Melrose Industries announced this morning its latest numbers for its 2018 year end, and a statutory operating loss of £392m, due to costs associated with the acquisition. Stripping that out, the operating profit came in at £847m. Reported revenues, came in slightly below expectations at £8.61bn with management citing wider macro challenges in a number of its businesses, which are expected to continue into 2019.
The company proposed a final dividend of 3.05p, making a total of 4.6p for the year.
National Grid (LON:NG) has announced that it has entered into an agreement to acquire Minneapolis based Geronimo Energy as it looks to increase its investment in the US renewable energy market. It will pay $100m while also looking to acquire a 51% stake in solar and wind generation projects currently being developed or under construction by Geronimo, for a further $125m.
It would appear that all of the spin around vegan sausage rolls in January helped Greggs post a decent increase in total sales and profits in its preliminary results for the latest financial year. Total sales rose 7.2% to over £1bn with shop like for like sales up 2.9% in 2018.
Pre-tax profits came in at £82.6m, an increase of 9%, while an increase in the dividend took it to 35.7p per share.
In terms of current trading the seven weeks to 16 February saw shop like for like sales rise by 9.6% as the company increasingly looks to focus on healthier options.
US markets look set to remain under pressure after last night’s sell off as investors continue to take profits after the failure to consolidate recent gains on the back of reports that a US, China trade deal is imminent. It would appear that even in the event of confirmation of a deal, and that is by no means certain, investors would appear to need further reasons to commit extra capital to drive this particular rebound to new highs.
Dow Jones is expected to open 90 points lower at 25,583
S&P500 is expected to open 7 points lower at 2,764