Stocks in Europe are mixed this morning as fresh uncertainty in relation to Brexit has hit sentiment. It was reported the EU said a deal was impossible unless the UK moves, which has dashed hopes for the possibility of an agreement being reached soon. Much of the major gains that were made yesterday were driven by the prospect of a deal being achieved, so now some dealers are reversing their positions.
ASOS (LON:ASOS) registered a 68% drop in full-year profit to £33.1 million, which was in line with the July guidance of £30-£35 million. The online fashion house has had a tough time in the past 10 months as a drop in consumer confidence plus operational issues prompted the firm to issues profit warnings. The group reiterated the point that ‘substantial progress’ has been made in recent months in terms of resolving operational problems. More work needs to be done to ‘get the business back on track’ said CEO Nick Beighton, but the company seems to be heading in the right direction. Net debt swung to £90.5 million from a cash position of £42.7 billion last year, but the drastic swing was due to capital expenditure to support the global infrastructure.
Today’s update should reassure traders somewhat as things haven’t gotten any worse at the group, but the path to recovery is likely to be long given the softer consumer climate. The operational issues in Germany plus the US have been costly, but hopeful the firm has learned from their mistakes, and they can put those problems behind them. The stock is up 17%.
Segro (LON:SGRO) issued a largely positive third-quarter update as rent roll growth from existing space, net of take-backs, was £2.1 million, a 61.8% drop on the year. For the nine month period, the figure was £10.6 million, which compared with last year’s figure of £6.9 million. There has been a 52% increase in terms of floor space for new developments in 2019 so far – which is capable of generating in excess of £33 million in rent. The firm’s development plans for the final quarter should equate to just over £15 million being derived in rent. The vacancy rate edged up slightly to 4.9% from 4.8% last year, but that isn’t anything to be overly concerned about. The company caters for online firms that require warehousing facilities – which is a growing sector. It is easy to see why Segro said it is heading into the ‘final part of the year with confidence’.
Barratt Developments (LON:BDEV) shares retreated from yesterday’s 11 month high as this morning the group said it expects growth volumes to be at the lower end of the medium-term target, which is 3-5%. The house builder said they had a good start to the year, but political as well as economic uncertainty exists on account of Brexit. Barratt’s balance sheet is healthy so it is in a strong position to react to any changes to the political or economic environment. Flexibility will be crucial should there be a disorderly Brexit, but Barrett Developments are well positioned for such an outcome.
Hammerson (LON:HMSO), British Land (LON:BLND), Land Securities (LON:LAND) and Intu properties shares are in the red as RBC lowered their outlook for the sector to perform from outperform.
GBP/USD is lower on the back of yesterday’s impressive rally. The mood in relation to Brexit is less optimistic as the DUP appear to be putting up resistance to any sort of arrangement that would treat Northern Ireland differently from Great Britain post Brexit. In addition, the EU want the UK to make further concessions.
UK CPI held steady at 1.7%, while the consensus estimate was 1.8%. The core reading is deemed to be a better reflection of underlying demand, and it edged up to 1.7% from 1.5%, which is encouraging to see.
EUR/USD slipped after the final reading of the September CPI report was revised down to 0.8%. The dip in demand does not bode well for the currency bloc.
Netflix (NASDAQ:NFLX) will be in focus as the group will release its third-quarter numbers after the market close today. The streaming services’ popularity seems to be running out of steam as the update in July showed poor subscribers numbers. The US customer base dropped by 126,000, which was nowhere near the gains of more than 350,000 that traders were expecting. On an international basis, the firm added 2.83 million new subscribers, undershooting forecasts. Apple (NASDAQ:AAPL) plus Disney will enter the streaming market this year so competition will be heating up, which is likely to put pressure on Netflix.
We are expecting the Dow Jones to open 74 points lower at 26,950 and we are calling the S&P 500 down 7 points at 2,987.
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