European stock markets are largely lower as fears about global trade have crept back into traders’ psyches. Tensions between the US and China have risen after President Trump threatened to slap a higher tariff on $200 billion worth of Chinese imports. This is seen as a move by Mr Trump to put pressure on Beijing.
Lloyds (LON:LLOY) shares are in demand after the bank posted a 23% jump in pre-tax first-half profits to £3.1 billion, and equity analysts were expecting £3.2 billion. The bank set aside £460 million for the mis-selling of payment protection insurance (PPI). The Financial Conduct Authority have made it clear that the deadline to claim compensation for the mis-selling of PPI is late August 2019, and Lloyds are predicting an increase in claims between now and then. The bank has a robust liquidity position as the common equity tier one capital ratio is 15.1%. The net interest margin measures the difference between the interest charged on loans versus what it pays out on deposits, and Lloyds confirmed their rate is 2.93% - which is a respectable level. The stock has jumped above its 50-day moving average at 62.8p, and if it can hold above that level its outlook might be positive.
Capita (LON:CPI) shares are in the red after the company revealed a 4% dip in revenue and a 58% fall in underlying profits before tax. The company is undergoing a major restructuring programme after a profit warning earlier this year, and the firm is ‘confident’ of a turnaround, but the recovery will be ‘long’. Capita stated that net debt fell by 54% and the cost cutting is going well too. The stock has been in a downtrend since July 2015, and if the bearish move continues, it could target 125p.
Volkswagen (DE:VOWG_p) warned about the rise in protectionism could hurt the business, and it confirmed that the Worldwide Harmonised Light Vehicle Test Procedure is the firm’s biggest threat to earnings. The car manufacturer confirmed that the production of 250,000 vehicles will be delayed as the company struggles to adapt to the anti-pollution test. The firm took a hit of €1.6 billion in relation to the diesel emissions sandal, and taking that into account, operating profits were down 13.2% and operating returns grew at a slower pace.
Rio Tinto (LON:RIO) confirmed that revenue rose by 3.1%, and underlying earnings jumped by 12%. The mining giant paid a record interim dividend of $2.2 billion and revealed a $4 billion share buyback scheme. Asset disposals freed up the cash for the capital returns, but it is concerning that net debt jumped by 36%. It would appear that Rio Tinto are trying to keep shareholders on side, but the debt levels need to be kept in check.
The US dollar index has edged up this morning as traders await the Federal Reserve meeting at 7pm (UK time). Traders will be listening out for any clues about the prospect of two more interest rate hikes this year.
EUR/USD is a little lower after Spain, Italy and Germany all posted a slowdown in the growth of their respective manufacturing sectors.
GBP/USD is a little softer after the UK manufacturing report for July was 54, while economists were expecting a reading of 54.2, and the June report was 54.4.
Tesla (NASDAQ:TSLA) will report its results tonight, and the stock will be in focus as the company posted its worse quarterly loss earlier this year. The firm is planning on building a $5 billion factory in China.
We are expecting the Dow Jones to open down 15 points at 25,400 and we are calling the S&P 500 down 1 point at 2,816.
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