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Bullish Equity Move Continues; Ted Baker Rocked By Profit Warning

Published 11/06/2019, 11:19
Updated 03/08/2021, 16:15

Stock markets are higher this morning as the rally in Asia overnight boosted investor confidence in Europe. The Beijing authorities suggested that ‘local government bonds’ could be used to fund infrastructure projects. Loading up on debt and throwing money at the problem has long be standard practice for China, but the move managed to boost Asian markets. The trade standoff between the US and China still continues, President Trump said that levies will be raised if China’s Xi Jinping fails to attend the G-20 meeting later this month ,but traders are viewing that as a potential problems for a few weeks’ time.

Ted Baker’s shares have plunged today after the company warned that it had an ‘extremely difficult’ start to the year, and that underlying full-year underlying pre-tax profit will be between £50 million and £60 million, while equity analysts were predicting £72 million. Ted Baker (LON:TED) blamed a tough trading environment for the earnings downgrade. The fashion house fell into the trap of offering high levels of promotions. For many firms in the retail sector it is race to the bottom in terms of price, and the customer wins, while the investor suffers. The share price dropped to a level not seen since December 2012, and that underlines the sour investor sentiment.

Crest Nicholson (LON:CRST) issued a mediocre set of six-month numbers. Profit before tax dropped by 11% to £64.4 million, as operating margin dropped by 270 basis points to 14.1%. The company has been suffering from weaker margins for a while, as cost inflation has been hit by higher building material costs, and skills are in short supply. The group introduced an initiatives such as pre-funded homes to help lower forward sales risk, and it has worked as forward sales jumped by 15%. Despite the political uncertainty in relation to Brexit, the company is performing well. The stock has rebounded from the sell-off in October that was triggered by a profit warning, and it seems that investors have gotten used to the fact the firm’s operating margins are under pressure.

Another house builder, Bellway (LON:BWY), made an announcement today. The company issued a trading update, which was broadly positive, and the firm said it will deliver earnings growth in line the management’s expectations, and reservations for the four months until 2 June ticked up by 4.7%.

Halma (LON:HLMA) shares are higher this morning after the company posted a 13% rise in revenue to £1.21 billion –a record level, and pre-tax profit jumped by 20% to £206.7 million. The dividend was upped by 7%, and the company expects to ‘make good progress’ in the year ahead. Global trade tensions and Brexit have dominated financial news headlines in recent months, but the firm hasn’t seen any ‘material effects’ of Brexit or the US-China trade spat.

GBP/USD was given a lift by the solid UK jobs and wages data. The unemployment rate held steady at 3.8%, meeting forecasts, and the average earnings excluding bonuses jumped to 3.4% in April, topping the 3.1% forecast. Given that earnings are comfortably outstripping wages, workers are receiving a nice increase in real wages.

We are expecting the Dow Jones to open 120 points higher at 26,182 and we are calling the S&P 500 up 5 points at 2,901.

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No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. "

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