Stocks have slipped today as some of the positive sentiment surrounding US-China trade talks has evaporated. We were updated yesterday that the discussions ended on a positive note, but there is still some way to go. China has agreed to purchase more US goods, and progress has been made in relation to intellectual property rights, but the full picture has yet to be revealed. The lack of new news has prompted dealers to take some profit off the table.
Overnight, China’s inflation rate cooled to 1.9%, from 2.2%. The PPI rate fell from 2.7% to 0.9% - its lowest reading since late 2016. This is another clear sign that China is slowing down, and mining stocks like Rio Tinto (LON:RIO), Anglo American (LON:AAL) and Glencore (LON:GLEN) are lower this morning.
Halfords (LON:HFD) shares have slumped this morning after the group warned on profit. The firm now expects full-year profit before-tax to be between £58 million and £62 million, while in November, the group predicted that earnings will be largely in line with last year’s figure of £71.6 million. The company blamed the mild weather and the softer consumer environment for today’s negative update. The share price gapped lower, and a break below 200p, might bring 188p into play.
Tesco (LON:TSCO) shares are in demand after the firm revealed solid figures. The supermarket said UK Christmas sales grew by 2.2%, and like-for-like (LFL) sales in the UK and Ireland including Booker Group increased by 1.9%. British and Irish Christmas LFL sales rose by 2.6%, both in terms of volume and value – this is impressive as it suggests the group didn’t resort to discounting to draw in customers. Low single digit sales growth may not be much, but it puts the firm well ahead of the other ‘big four’. Adding to the respectable numbers, Tesco declared it is ‘confident’ in its outlook, and that it is ‘bang on track to deliver’ their plans. It is clear that Dave Lewis’ turnaround plan is working. The stock has been pushing higher since late December, and a break above the 230p region, should pave the way for further gains.
Marks and Spencer (LON:MKS) shares are in demand after the company revealed disappointing food sales, but they topped forecasts, so sentiment is positive. Same-store food sales dropped by 2.1% in the third-quarter, while equity analysts had predicted a 2.5% drop. In the same period last year, the retailer registered a 2.7% decline. The clothing and homeware division continues to drag on the company as LFL sales declined by 2.4%, while the consensus estimate was for a 1.6% drop. The group described their performance as ‘steady’ in a ‘difficult’ market, but on the bright side, the transformation plan is ‘on track’. The stock is one of the most shorted companies on the London Stock Exchange, and in light of today’s update, the short squeeze is likely to continue.
Debenhams (LON:DEB) declared that that same-store-sales over the 18 weeks until 5 January fell by 5.7%. The retail described October and November as ‘very tough’, and in relation to funding, they are said they are in talks with Mike Ashley.
EUR/USD is in the red after the US dollar rebounded from the three month lows last night. Disappointing French industrial output figures weighed on the euro too. The report showed that industrial output fell by 1.3% in November, while economists were expecting it to be flat on the month.
Bed Bath & Beyond (NASDAQ:BBBY) issued a strong set of third-quarter results last night. Earnings per shares for the period were 18 cents, which topped the 17 cents consensus estimate. The group stated that 2019 full-year earnings will be largely unchanged from last year’s figure, and that would be a major improvement on analysts’ forecasts. Some banks were expecting 2019’s profit to fall by over 20%.
We are expecting the Dow Jones to open 144 points lower at 23,735 and we are calling the S&P 500 down 19 points at 2,566.
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