A rise in Italian bond yields has put major pressure on the FTSE MIB, and other European markets are feeling the pain too. The coalition government has agreed to run a budget deficit of 2.4%, and the two parties in power are keen to boost public spending in a bid to stimulate the economy. Brussels will not be happy with the announcement as they would like to see the budget deficit being capped at 2%.
The Italian government is sitting on a mountain of debt, and the boosting in public spending is likely to make them more indebted, which could trigger another debt crisis in the currency bloc.
EasyJet shares (LON:EZJ) are in the red after the company released a mixed trading update. The airline narrowed its full-year pre-tax profit guidance to between £570 million - £580 million, and the previous guidance was for £530 million - £580 million. It is worth noting that last year’s full-year pre-tax profit was £408 million. The ‘robust’ demand in the fourth-quarter offset the less than impressive third-quarter, where adverse weather and traffic control restrictions hurt profits. Operating costs and fuel costs are to be higher than originally predicted. The stock has been in decline since June, and while it remains below its 200-day moving average at 1,600p its outlook could remain negative.
Serco (LON:SRP) shares have jumped this morning after the firm said it expects full-year profit to rise by more than 30%. The company cited tougher cost control and a stronger operational performance for the positive update. The group has been focusing on overseas contracts to offset the cooling of UK public outsourcing. The struggling company anticipates net debt to be at the lower end of guidance and it paid off loans, and this is further proof the group is turning itself around. The share price has gapped higher this morning, and if it exceeds the 105p mark, it could target the 120p region.
The dominance of the US dollar continues and even though Germany revealed a record-low unemployment rate of 5.1%, it did little to move EUR/USD. Eurozone CPI ticked up to 2.1% on an annual basis – meeting expectations. The core figure dipped to 1.1%, from 1.2%, so actual demand is slipping.
The British economy grew by 0.4% in the second-quarter, on a quarterly basis, and that was in line with expectations. The announcement caused a short-lived sell-off in GBP/USD.
Tesla (NASDAQ:TSLA) shares will be in focus today as the Securities and Commission Exchange has charged Elon Musk for issuing ‘false and misleading’ statements regarding securing the funding to take the company private in August. Mr Musk might be barred from acting as a director of a publically listed company.
We are expecting the Dow Jones to open up 16 points at 26,455 and we are calling the S&P 500 up 1 point at 2,905.
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