Having seen US markets hit new record highs yesterday, markets in Asia picked up the baton, as the Nikkei225 hit its highest levels since September 2018, as optimism grew that tensions around trade could well get dialled back further. Reports that the US was considering dropping some tariffs on Chinese goods helped oil the wheels further.
This optimism has seen markets here in Europe continue their advance higher, with the DAX and CAC40 over 20% higher year to date, thus far. The FTSE100 by contrast has lagged behind, only just over 10% higher year to date.
Imperial Brands (LON:IMB) latest full year results paint an uncertain future as the company said that they expected to see low single digit growth in 2020. With the share price at ten year lows, departing CEO Alison Cooper has overseen a difficult year, having last month overseen a cut to revenue guidance on the back of concerns that the health problems now being expressed about vaping could result in a sharp slowdown in sales. Revenue from NGP products rose 48% in the year just gone, well below market and company expectations
In August we heard early reports about a series of deaths from the 18-35 age group which may have been linked to vaping. These reports have now turned into a torrent and ultimately nixed the recent attempts by Altria (NYSE:MO) and Philip Morris (NYSE:PM) to come back together after an 11 year separation. The tobacco industry appears to be facing the prospect of an existential crisis, with a crackdown on normal cigarettes already cutting into profits, e-cigarettes were supposed to be the next key growth area.
This strategy now appears to be under threat after the US threatened to ban e-cigarettes from the market, until the US Food and Drug administration has done a more significant study. There is also the not insignificant threat that the sector could face, which could send the sectors earning potential up in smoke.
Associated British Foods (LON:ABF) latest results also paint a picture of a competitive retail environment, with the company expecting to see a small reduction in margins on its Primark business, over the next year. While disappointing this should be manageable given how operating margins have improved this year, from 9.8% to 11.7%, and markets appear to agree with the shares opening higher.
Despite this the company posted adjusted operating profits of £1.42bn, an increase of 1%, modestly beating expectations, while revenues rose to £15.8bn a rise of 2%.
Taking into account a £79m exceptional charge, profits before tax showed a decline of 8%, coming in at £1.28bn.
Across the various businesses, sugar was once again the underperformer, with revenues and profits showing sharp declines. Profits here fell 79%, while the retail business once again helped pick up the slack with a decent 4% rise in revenues and an 8% increase in profits. The UK Primark business saw a significant gain in market share, with sales growth of 2.5%, while sales in the Eurozone rose 4.8%.
If WeWork were looking at a template of how to run a workspace company properly they need look no further than UK based IWG, who this morning reported Q3 numbers that showed money can be made in this sector. Year to date revenues were up by 15.4%, while occupancy rates saw a rise of 2.2% to 76.4%, from a year ago.
In Q3 revenues came in at £692.3m, an increase of 9% on the previous year while total revenues for the year are up nearly 10% to just shy of £2bn. The company has also taken steps to offload what it considers underperforming parts of the business, agreeing to sell its Swiss for about £90m.
The luxury sector has seen its fair share of winners and losers over the course of the past few weeks, with M&A a key component in this particular sector. The recent bid by LVMH for Tiffany is a case in point, as the big brands look to diversify their product mix. This morning’s profits warning by Danish jewellery maker Pandora is the latest in a long line of warnings this past year as sales remain sluggish, sending the shares sharply lower.
When new CEO Alexander Lacik took over in April he embarked on a turnaround plan, which included cutting costs and simplifying its product range, however it looks like his plan to reshape the business may well take longer than expected as management downgraded expectations for next year.
The US Dollar appears to be undergoing a bit of a turnaround in the past couple of days after hitting a three month low last week it could well be starting to see signs of some positive momentum as the outlook around trade gives indications of an improvement. Even a modest trade deal removes the prospect that the Fed will have to ease further, helping underpin the US dollar.
The Australian dollar is the best performer after the Reserve Bank of Australia kept rates unchanged, while a modest easing by the Peoples Bank of China of its medium term lending facility helped boost other commodity currencies.
US markets look set to pick up where they left off yesterday, with more new records expected later today, despite some mixed earnings announcements.
The highest profile being Uber’s latest numbers which unsurprisingly proved to be full of more red ink. While the losses in Q3 weren’t as bad as Q2, they were still worse than expected. Its rides business was the only area which saw some decent revenue growth, rising to $2.9bn, a rise of 25%, however losses in its other businesses dragged the business down and pushed overall losses up to $1.2bn, a rise of 18% from a year ago.
Dow Jones is expected to open 30 points higher at 27,492
S&P 500 is expected to open 4 points higher at 3,082
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