Stock markets across Europe are heading towards the end of the week on a lower note with the FTSE trading down almost 0.5%. A brief burst of optimism that China and the US may find a negotiated solution to their trade imbalances was snuffed out Wednesday after the Sino-American talks which started this week hit the rocks.
Now President Trump is proposing that the US should hike tariffs on Chinese goods to 25%, up from the 10% initially suggested by US negotiators. The proposal will likely be put to industry leaders over the coming weeks and a final decision is unlikely to be reached before September. Nevertheless, the markets took note and started bidding down stocks and commodities that are likely to be affected if the higher tariffs on China are accepted.
Miners plunge on Rio Tinto (LON:RIO) results and trade talks
As usual, miners ended up in the cross hairs of the US-China trade shoot out with all of the top seven biggest fallers in the FTSE 100 this morning being mining and metal trading companies. Their already fragile situation was not helped as Rio Tinto reported that both its first half profits and dividends came in below expectations. Shares in the Anglo Australian miner fell nearly 3% in Australian trading but recovered slightly to only 2.6% lower after London opened.
BoE rate meeting expected to end with rate hike decision
The pound is losing ground against the dollar and to a lesser extent the euro this morning ahead of the Bank of England meeting which could end up with a decision to raise interest rates to 0.75%.
The decision is unlikely to be straight forward as it takes place against a backdrop of uncertainty in Brexit negotiations and among mixed macro-economic signals. BoE officials have already indicated that Britain’s economy is at risk of overheating unless borrowing slows down but also said that a failure to reach a deal on Brexit would create complete uncertainty over future rates moves.
Beast from the east puts a big dent in Aviva’s profits
The Beast from the East has put a big dent in Aviva (LON:AV)'s general insurance profits, while bad weather in Canada hasn't helped much either.
Fortunately, strength in its life and fund management units have taken up the slack, allowing Aviva to keep the dividends coming.
At 10%, growth in this year's interim dividend is a little slower than last year's 13%. But don't be surprised if the company offers another large increase in its final payout for the year, weather permitting.
Aviva's life business is humming along nicely these days, as aging populations seek a stable retirement income, either through traditional annuity products or increasingly popular lifetime mortgages.
It's funds management arm, while the smallest contributor to profit at the moment, has plenty of opportunity to grow as Aviva leverages its large customer base to cross-sell investment products.
Rolls-Royce (LON:RR) sees some light at the end of the tunnel
There's still a lot of red ink in this result, but the free cash flow beat will come as a big relief to investors concerned that Rolls-Royce's medium-term targets were too ambitious.
Clearer guidance has been provided on the full cost of the Trent engine debacle. As expected, it's not pretty, with another £450m hit seen next year and up to £350m in 2020. Investors at least now have a better handle on what to expect
The key engine business is still making an underlying loss, but a surge in sales volumes bodes will for the future, as Rolls-Royce benefits from providing ongoing maintenance and spare parts services.
The power systems business has been a star performer, largely thanks to a recovery in mining and oil markets that are enjoying higher commodity prices.
Add the expected cost savings inherent in Rolls-Royce's massive restructure program and we're seeing some light at the end of the tunnel here.
Vivo Energy (LON:VVO) shares brought back down to earth with a bump
Vivo Energy shares got off to a flying start when they listed in May, but they've been brought down to earth by a recognition of the risks inherent when operating in Africa.
The company's first-half numbers are sound enough: fuel sales are tracking in line with company guidance, non-fuels sales have jumped by more than a fifth and costs are under control.
The acquisition of Engen International promises to expand Vivo's reach into nine more African markets including Zimbabwe, Mozambique and Tanzania -- though clear guidance on the deal's completion date remains elusive.
Africa certainly represents a high-growth opportunity: Vivo pointed out when it listed that economic growth across the countries in which it operates averaged around 4% a year. But inflation is doggedly high in many African nations, potentially weighing on consumer demand and stoking political instability.
In few more places are the risks more apparent than in Vivo's key market of Morocco, where the government has just outlined a plan to put a cap on fuel prices. More clarity on the political situation in Morocco, and the price cap's potential impact on Vivo's margins, might be needed before the shares can breach their 165p IPO price again.
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