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Politics Weighs On Sentiment; Morrisons Lower After Sales Miss

Published 06/11/2018, 11:44
Updated 03/08/2021, 16:15

European stock markets are a little in the red as political uncertainty hangs over investor sentiment. Rome and Brussels continue to be at logger heads, and even though we heard conciliatory comments from the Chinese vice president overnight, traders are still nervous regarding the US-China trade spat. The midterms are underway in the US today, and that will draw traders’ attention too.

Morrisons (LON:MRW) posted a 5.6% rise in third-quarter underlying sales, but equity analysts were expecting a 6.1% jump, and it is worth noting that second-quarter sales grew by 6.3%. The supermarket registered its twelfth consecutive quarter of underlying sales growth. Due to the World Cup, and the hot weather, the second-quarter was always going to be a tough act to follow. The group has made a remarkable recovery in recent years, as its refurbished stores, improved product range and enhanced customer service have helped the group. The tie up with Ocado (LON:OCDO) and Amazon (NASDAQ:AMZN) have helped the firm tap into the e-commerce world, and supply of McColls convenience stores is assisting with diversification. The stock has been pushing higher since March, and if it holds above the 200-day moving average at 243p, it could target 275p.

Direct Line (LON:DLGD) confirmed that gross written premium declined by 5.8% in the third-quarter. The drop off in policy numbers was partially due to the ending of partnerships with Nationwide and Sainsbury’s. A change in legislation aimed at reducing the size of personal injury claims has led to lower insurance premiums .The company’s CEO, Paul Geddes, said the company performed well in a ‘competitive market’, and confirmed the group is on course to meet its 2018 and ‘medium-term financial targets’. The stock has been in a decline for over one year, and if the bearish move continues it could target the 300p mark.

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Randgold Resources (LON:RRS) posted a 26% rise in third-quarter net profit as falling production costs helped the bottom line. Gold production for the period dipped by 1.5%, but the cash cost per ounce slipped by 16%. The respectable numbers come at a time when Barrick Gold and Randgold Resources are on the cusp of a merger. Barrick shareholders backed the proposal yesterday, and Randgold shareholders will vote on it tomorrow.

EUR/USD is slightly higher this morning despite the underwhelming service PMI reports from Italy and France, both updates missed investors’ forecasts. This underlines the view that the currency bloc is going through an economic slowdown.

US politics will be in focus today as the midterms get underway. There is talk the Democrats will retake the House of Representatives, and the Republicans will cling on to their slim Senate majority. If the Republicans retain both houses, it might pave the way for President Trump to introduce more tax cuts. A poor Republican performance might encourage Mr Trump to think twice about his protectionist policies.

We are expecting the Dow Jones to open 31 points lower at 25,430 and we are calling the S&P 500 down 7 points at 2,731.

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.

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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. "

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