Uncertainty around Italy and Brexit are weighing on sentiment. The Italian government made no changes in relation to their budget proposal, and Italian government bond yields are higher on the back of it as dealers are nervous about the potential fallout. Prime Minister May has reached an agreement with the EU over the withdrawal, but there are doubts if she can sell it to her own party. Royal Dutch Shell (LON:RDSa) and BP (LON:BP) are lower again despite the bounce back in the underlying oil market.
Flybe shares have risen after the company has announced it is seeking to sell-off parts of the business, or perhaps sell-off the entire organisation. Six month pre-tax profits dropped by 54%, and revenue slid by 2.4%, while net debt jumped by 40%. The cash flow position is dwindling, which is worrying. There is chatter that two credit card processor might increase their cash collateral, which would put pressure on the struggling airline. Nearly all the early gains in the share price movement have been handed back. The stock has lost 75% of its value since March, and a break below 10p, could pave the way for further losses.
Workspace shares are in demand this morning after the company announced a solid set of first-half figures. Trading profit rose by 20%, and that was driven by the 17% rise in rental income. The group issued a positive outlook and hiked the interim dividend by 20%. The real estate investment trust (REIT) continues to perform, as its well-located office space, and flexible lease terms continue to be in demand. It is encouraging to see that demand for office space is still growing even though some companies complain about the uncertainty surrounding Brexit. The stock has been pushing higher for over two years, and if the wider upward trend continues it should target 1,100p.
British Land, another REIT, issued less impressive first-half numbers. Underlying profit dropped by 14.6%. Approximately 40% of the group’s assets are in the retail industry, and that is the drag on the business. Footfall at shopping centres is falling due to the growing popularity of online shopping. The company lost over £14 million in relation to insolvency and administration agreements. The dividend was maintained, but that might need to be put under review given the performance of the stock. The share price has been in decline since 2015, and if the bearish move continues it might target 550p.
GBP/USD is lower today as uncertainty in relation to Brexit continue. Theresa May has struck a deal with EU, but there are a number of pro –Brexit Conservative MP, and the DUP, who might be unhappy with the agreement, so getting it passed parliament will be another separate fight for the Prime Minister. UK CPI held steady at 2.4%. This bodes well for British workers given that wages grew by their fastest rate in 10 years yesterday.
EUR/USD is softer due as the German economy contracted by 0.2% in the third-quarter. The yearly report showed the economy grew by 1.1%, a big drop from the 2.3% growth achieved a year previous.
Exxon (NYSE:XOM) and Chevron (NYSE:CVX) will be in play today after WTI dropped over 7% last night .The energy market has since bounced back, but sentiment is clearly weak.
We are expecting the Dow Jones to open 11 points lower at 25,275 and we are calling the S&P 500 down 4 points at 2,718.
"DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "