Yesterday proved to be somewhat of a mixed session for European and US markets and this pattern appears to have been repeated in Asia this morning as investors await the next move in the ongoing trade spat between the US and China.
The Nikkei 225 has been the standout performer posting some strong gains for the second session in succession. There has been little notable reaction to reports that North Korea leader Kim Jong Un was looking to organise another meeting with President Trump.
Against this backdrop of “wait and see” European markets have also opened mixed his morning, with the FTSE100 slipping back on a slightly firmer pound, looking to stabilise just above five month lows from last week, helped in no small part by the lack of any new developments in the trade story. The delay in implementing new tariffs could be tempting some investors to dip their toes back into the water so to speak on a very selective basis, with the DAX and CAC40 edging cautiously higher.
On the earnings front industrial and construction equipment hire specialist Ashtead (LON:AHT) has seen its shares surge after posting Q1 revenues well in excess of expectations, coming in at over £1bn. Pre-tax profits also came in ahead of expectations of £285m, easily beating expectations of £270.5m. Management also raised the company’s full year guidance in light of today’s numbers but also in line with an improvement in rental revenues which showed a rise of 19%.
The recent weakness in the pound from its April highs against the US dollar has clearly helped the numbers, a fact acknowledged by senior management, given that the company generates the majority of its revenues in the US by way its subsidiary Sunbelt Rentals, nonetheless
The retail sector is also in focus today with the latest numbers from JD Sports (LON:JD) showing, despite all the doom and gloom in the sector with House of Fraser and Debenhams (LON:DEB), there are still some good news stories out there. Earlier this year JD Sports surprised a few people by expanding into the US with the acquisition of Finish Line for £400m, a company that is one of the key suppliers to Macy’s (NYSE:M) department store.
Given the strength seen so far this year from US consumers this looks to have been a smart move, however the strains on US consumers wallets aren’t that dissimilar to the ones being faced by UK consumers, which means that JD Sports is just as vulnerable to the on-line threats being posed by the likes of Amazon (NASDAQ:AMZN), as its US counterparts. That being said the price of £400m seems a small price to pay to access one of the world’s largest leisure ware markets.
Today’s H1 results would appear to bear that out with revenues rising 35% to £1.85bn, with like for like sales up 3%. Pre-tax profits also increased by 19% to £121m, helped by its recent purchase of US chain Finish Line. Nonetheless the UK business also showed a positive contribution despite a struggling UK high street. The company said it expected to meet its full year profits target, with its recent US acquisition expected to make a much bigger contribution than the $6.2m we saw in the first half numbers.
On the currencies front the pound has continued its recent recovery buoyed by a more conciliatory tone from EU chief negotiator Michel Barnier, as well as an economy that appears to be shrugging off a lot of the Brexit uncertainty being talked about in political circles. For all the sound and fury of the politics the fact is that for all the disagreements over Chequers the divorce agreement is entirely separate from the future trade relationship. The Irish border undoubtedly remains an issue, nonetheless the hurdle factor is still lower given that when it comes to an agreement in the next few weeks, given that all the noise about Chequers revolves around the future relationship.
Yesterday we got a snapshot of how the UK economy performed in July and it was a pretty positive picture. Today’s economic data probably won’t do anything to alter that perception with the latest unemployment numbers expected to remain steady at 4%, while the Bank of England will be hoping that the rebound in wages in the US last week is reflected in today’s wages numbers. Expectations for weekly earnings excluding bonuses are expected to edge back up towards this year’s high with a rise to 2.8% from 2.7%.
Dow Jones is expected to open 53 points higher at 25,910
S&P500 is expected to open 6 points higher at 2,883
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