Traders have adopted a risk-off strategy this morning as the mediocre finish in New York last night, left traders a little uneasy. Yesterday the Dow Jones hit a record high, but closed well off the highs, and the S&P 500 and NASDAQ 100 couldn’t take out their recent highs. The surge in US bond yields could draw money away from stocks. Investors are wary about the potential political fight between the Italian government and the EU, as it could put pressure on Italian government bonds, and that might trigger another round of the eurozone debt crisis.
Ted Baker (LON:TED) shares are in the red after the company confirmed that first-half pre-tax profit fell by 3.2% The group incurred one-off costs such as a £4.7 million charge due to restructuring costs and a £600,000 cost relating to House of Fraser going into administration. Stripping out the exceptional costs, earnings increased by 3.5%. The most worrying component of the update was the fact that sales per square foot of store space fell by 9%, and this is a sign of the times. The retailer did offset this through e-commerce sales which jumped by 24%, and the department is becoming an ‘increasingly important component’ of the business. The nature of the fashion industry is changing, and the company will need to focus more on the online side of the business if is wants to stay competitive. The stock has been pushing lower since March, and if the bearish move continues it could retest the 2,000p mark.
Ferguson (LON:FERG) shares are higher this morning after Peel Hunt raised its price target to 5980p, from 5,300p. Keep in mind, Canaccord upped its price target for the company yesterday from 6,300p to 6,400p. The positive upgrades come after Ferguson announced respectable figures during the week, and the US division continues to perform well.
BP (LON:BP) and Royal Dutch Shell (LON:RDSa) shares are in demand this morning due to the recent rally in the oil market. Traders continue to be fearful about future supply levels as the US’s sanctions on Iran will kick in next month.
Overnight the US dollar index hit its highest level since mid-August on the back of the strong ADP employment and ISM non-manufacturing figures yesterday, and this morning the greenback has cooled a little. EUR/USD is a little higher and volatility could remain low as we are not expecting any major economic announcements from the eurozone today. GBP/USD has gained ground as there is talk the British government are looking into an all-UK customs union with the EU. The Irish government have backed this proposal and that has helped the pound’s prospects.
Tilray (NASDAQ:TLRY) will be in focus today after the company announced plans to offer $400 million worth of convertible notes to institutional investors, and the notes could be converted into stock. The firm is clearly beefing up its cash position, but that could come at a cost of stock dilution.
We are expecting the Dow Jones to open 100 points lower at 26,728 and we are calling the S&P 500 down 14 points at 2,911.
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