Stock markets in Europe are higher this morning as global trade tensions have cooled. The Trump administration held-off on imposing tariffs on imports from Mexico as improvements in relation to the US-Mexico border security have been made, and the US government has ‘full confidence’ that the Mexican administration will uphold its border security commitments.
Things have eased a little on the Chinese front, as Steve Mnuchin, the US Treasury Secretary, said Mr Trump will make a decision on higher levies later this month, when the US president meets with Xi Jinping of China. Some of the fear has drained from the markets and that is why stocks are pushing higher.
Thomas Cook (LON:TCG) shares are in demand this morning after it was confirmed that Fosun Tourism is considering bidding for the group’s bus tour operating business. A preliminary approach by the Hong Kong firm was made, but there is no guarantee of a formal offer. Thomas Cook registered a £1.5 billion loss nearly one month ago, and warned of further ‘headwinds’, and the company has been struggling since. There has been chatter that the London-listed travel firm would break-up, and this could be the beginning of the firm being spun off. Investor confidence remains fragile, and a reduction in size and a cash injection is likely to help stabilise the share price.
Ferguson (LON:FERG) shares are in the red after the company announced a 6.2% rise in third-quarter revenue to $5.27 billion, which undershot the $5.36 billion that analysts were expecting. The US is the company’s largest region, and it said that organic revenue growth in the country was 3.3%, which was a sharp cool down from the 9.7% growth achieved in the second-quarter. The company announced a $500 million share buyback plan, which seems a bit strange seeing as net debt ticked up slightly. The company confirmed that group trading profit will be in line with equity analyst’s forecasts.
Avanti Communications (LON:AVN) confirmed that profit before tax was $83.2 million, which compared with a loss of $77.7 million 12 months ago. The company’s decision to change the year-end reporting period meant that staffing costs were higher as two staff bonuses were included in 2018. The company’s restructuring programme is going well, and the fact it won new contracts helped boost sentiment too.
GBP/USD is in the red on account of the firmer US dollar, and the broadly disappointing UK economic report added to the sell-off. The UK GDP estimate for April showed negative growth of 0.4% on a month-on-month basis, while economists were expecting a drop of 0.1%. Industrial output and manufacturing output fell by 2.7% and 3.9% respectively, both came in under forecasts.
EUR/USD has also been hit by the rebound in the greenback. Italian industrial output declined by 0.7% in April, and the consensus estimate was for 0.1% growth.
Raytheon (NYSE:RTN) and United Technologies (NYSE:UTX) will be in focus today after the companies agreed over the weekend to merge. The new entity will become the second largest defence and aerospace company in the US in terms of revenue, and Boeing (NYSE:BA) is the largest. United Technologies have been selling-off less profitable units of the business recently, and by teaming with the defence focused Raytheon, it should beef up the new group.
We are expecting the Dow Jones to open 102 points higher at 26,085 and we are calling the S&P 500 up 10 points at 2,883.
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