It’s been a slow start for markets in Europe as optimism about further talks between the China and the US over trade ebbs away, prompting some light selling after three successive days of gains.
China state media indicated that the Chinese government had little interest in pursuing further talks under the current climate of higher tariffs and hostility towards Huawei. The calculation appears to be that the US needs to show some semblance of wanting to talk, and that any further dialogue may well not happen much before the G20 next month.
This doesn’t appear to have gone down well with light selling in European trading, however as we head into the weekend the losses are fairly modest, which would suggest that investors aren’t overly concerned, at the moment.
Accounting software company Sage Group (LON:SGE) has seen its shares drop after announcing its first half numbers. In what seems a classic case of buy the rumour sell the fact the company has announced that revenues rose 6.4% to £957m, while profits rose to £210m, a rise of 12.9%. with the shares closing at new record highs yesterday, on expectations of a good set of numbers.
Management also stated that they expected the rest of the year to equally as positive with guidance at the top end of expectations.
EasyJet (LON:EZJ) shares have spent the last four weeks declining steadily, down 28% since March, as the airline and travel sector in general feels the pressure of lower margins, and rising oil prices.
Today’s first half update has merely served to reinforce the difficult operating environment in the travel sector as they announced a pre-tax loss of £272m for the year to date, with the Gatwick drone incident costing it around £10m alone. The company also warned that they hadn’t seen a post Brexit extension pickup in bookings despite anecdotal reports in April of a surge in holiday bookings. With Brexit unresolved management had low expectations for the remainder of 2019.
Despite the pessimism about the rest of the year there has been relief that the outlook hasn’t changed that much since the airline warned on profits a few weeks ago, and this has seen the shares rebound modestly.
The company did express pessimism about the outlook for the second half as lower fares squeeze margins, but said that the company was well positioned to weather future downward price pressures.
Thomas Cook (LON:TCG) shares have plunged again, this time after being on the receiving end of a sell recommendation from Citigroup (NYSE:C), with a 0p target price. Yesterday, management had stated that they had received multiple bids for its airline assets. The problem the company is now facing given its huge debts is that they may have to sell these assets at fire sale prices, as investors and markets lose confidence of the ability to turn the business around.
The news that Amazon (NASDAQ:AMZN) has taken a $575m stake in Deliveroo is a shot across the bows of companies like Just Eat (LON:JE) and Uber who have become ubiquitous players in the on line delivery space.
On line takeaway delivery company Just Eat shares have plunged on the open after this morning’s announcement that Deliveroo has accepted a $575m cash injection from Amazon. This is also likely to be bad news for Uber (NYSE:UBER), as margins in this sector face the prospect of being squeezed further.
This could be the thin end of the wedge and the beginning of an attempt by Amazon to broaden its delivery footprint, with respect to same day delivery, as well as expand its move into the food sector.
The pound has continued to come under pressure as it becomes increasingly apparent that Prime Minister Theresa May’s premiership is on borrowed time. With opinion polls increasingly showing the Conservative party at historically low polling levels, the prospect of a new Prime Minister, or a general election and the prospect of a Labour government, investors appear to be taking the view that from a political point of view, particularly the low calibre of politicians on all sides, the UK is running the risk of becoming uninvestable,
US markets look set to open lower on the back of this weaker tone with the main interest likely to be on Pinterest (NYSE:PINS) after the company reported its latest Q1 numbers, the first official update since its recent IPO.
Losses came in much higher than expected at $41.4m on revenue of $201.9m this shouldn’t have been too much of a surprise given that there are always a lot of one off post IPO costs in the wake of a stock market flotation.
Even after that there was some disappointment at the headline numbers, and while all of the costs weren’t included in the latest numbers there was some concern at how quickly costs had risen.
The biggest concern is revenue from international users and how the company can expand as well as monetise that, given that the US markets is more or less at saturation levels.
We also have another IPO, this time from Avantor (NYSE:AVTR) which has lowered its price range from $18 to $21 to between $14 to $15 as it looks to raise $3bn as opposed to the previous $4bn.
Dow Jones is expected to open 53 points lower at 25,809
S&P500 is expected to open 6 points lower at 2,870
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