European markets initially took their cues from last night’s decline in US markets, opening modestly lower, with no sign that either the US or China is in the mood to back down from their respective positions on trade.
We now appear to be clawing those losses back, despite the US getting set to widen the scope of its attack angle after President Trump took aim at Germany over the Nordstream 2 oil and gas pipeline, threatening to impose sanctions on companies that have interests in this project. He also talked about withdrawing US troops, and relocating them into Poland.
Tesco (LON:TSCO) latest Q1 numbers showed that the UK’s number one supermarket managed to post a distinctly average quarter in what continues to be a highly competitive food retail sector. According to the latest Kantar numbers released at the end of last month, market share has declined modestly to 27.3%, however despite this, like for like sales rose by 0.8%, coming in at £11.16bn, with the UK market only showing a rise of 0.4%. This was a disappointment despite a decent Easter performance, and was quite a bit less than some of the more optimistic forecasts of 0.8%. The growth of online and click and collect was a key driver with on-line sales rising 7% year on year and 10% of customers choosing the click and collect option.
In the latest sign that the online grocery market continues to evolve, supermarket chain Morrisons (LON:MRW) announced that it was expanding its “Morrisons at Amazon (NASDAQ:AMZN)” same day online delivery service to more cities across the UK. Currently the service is available on Prime Now to Leeds, Manchester, Birmingham and some parts of London. Morrisons have said that they will be extending the service to Glasgow, Newcastle, Liverpool, Sheffield and Portsmouth.
Packaging provider DS Smith (LON:SMDS) looks well set to take advantage of the trend away from plastic to paper and card, as online shopping grows in popularity, as it reported its latest set of full year numbers. The acquisition of Europac for €1.9bn last year is likely to help add to its growth prospects in the longer term, along with the recently agreed sale of its plastics division. Full year revenues showed an increase of 12% to £6.17bn, which was slightly below market expectations. Adjusted pre-tax profits rose by 31% to £569m.
Ferguson (LON:FERG) shares have moved higher on the back of the news that Trian Investors have taken a 5.98% stake in the company, valued at £736m.
Having hit seven month highs yesterday, on reports that US hedge found Elliott Advisors was looking to buy the company’s 200 UK stores, Majestic Wine (LON:WINEW) shares have slipped back after the company reported its latest full year numbers.
The company is looking to offload all of its UK stores for around £100m, and move on line to keep costs down, and focus more on the Naked Wines side of the business.
Full year revenues came in short of expectations of £506.1m, rising 6.3%. when a rise of 6.6% was expected. The synergies with Naked Wines appear to be taking longer to bear fruit after the company swung to a loss in the first half of the year, as a tough retail market cut into its margins. On the plus side revenue growth for Naked accelerated to 14.5%, however it wasn’t enough to prevent an overall loss for the year of £8.5m.
The dividend was also suspended, however there was a caveat in that if the sale of Majestic stores is completed, then a special dividend would take the place of the suspended final dividend.
A sale would also help the free cash flow of the business which saw a decline from £24.9m last year to £1.9m this year.
Crude oil prices have spiked after a big fall yesterday, on reports that an oil tanker travelling from Saudi Arabia is on fire in the Gulf of Oman, as a result of a suspected attack.
The Swiss franc is the best performer today after the Swiss National Bank kept rates unchanged at -0.75%
US markets slipped back yesterday with tech stocks bearing the brunt of the declines, as trade concerns once again return to the fore. Recent updates from tech companies appear to bear out worries around revenues. In March, Broadcom (NASDAQ:AVGO) saw revenues rise 8.7% year on year and 6.3% on the quarter.
While this was below market expectations it wasn’t by much and was offset by the company guiding higher on revenues and operating margins. Management projected an increase to $24.5bn on revenues and 51% on the latter. Today’s update should tell us how optimistic this was given recent events and we could well see a modest downgrade to forecasts. One advantage Broadcom has its diverse business model with franchises in storage, as well as wired and wireless infrastructure, as well as software with its recent acquisition of CA Technologies.
Despite yesterday’s declines we look set to recover some of those losses, though investors are likely to remain cautious as we head towards the weekend.
On the data front the latest US weekly jobless claims are expected to come in at 215k, reflecting a US economy that still appears resilient, against a backdrop of a bond market looking to price in multiple rate cuts by year end.
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