China Props Up Market; IAG Weathers Storm

China Props Up Market; IAG Weathers Storm

CMC Markets  | May 10, 2019 12:12

European stock markets are taking their cues from Asian exchanges, and have rallied despite the announcement of higher levies on Chinese imports into the US. The Trump administration raised the levies on $200 billion worth of Chinese imports to 25% from 10%, but that does not include cargo that is in transit. Beijing said they will retaliate, but no details have emerged yet. It was reported that Chinese state-backed funds have been propping up the Chinese stock market in an effort to save face, and European markets have rallied too. If, or when, the Chinese funds stop snapping up stocks, then we get a true picture of global sentiment.

International Consolidated Airlines (LON:ICAG) stated that first-quarter operating profit dropped by 34% to €135 million, and the consensus estimate was €136 million. The company cited the timing of Easter, fuel costs and market capacity for the decline. Revenue increased by 5.2%, but passenger unit revenue dipped by 1.4% - due to lower yields. On the bright side, net debt dropped by 18.7%, and the group confirmed that operating profit in 2019 should be in line with 2018’s performance. Given the surge in fuel prices in 2019, it’s no surprise that profit was hit, but that is likely to impact the whole sector. Ryanair and easyJet have had their own problems in recent months, and it seems that IAG are in a better position to weather the storm of higher fuel costs. IAG have proved to be more reliable than the likes of Ryanair in terms of flights actually taking-off, and that will stand to the airline.

Thomas Cook (LON:TCG) shares are in demand this morning after Virgin Atlantic expressed an interest in the company’s long-haul business. Thomas Cook has had a number of suitors recently, as Lufthansa have expressed an interest in the group’s Condor business. The travel company has been struggling recently, and it is looking to sell-off assets in a bid to raise cash and beef up its balance sheet.

Lonmin (LON:LMI) shares sold-off this morning after the company cautioned that full-year sales would be at the lower end of expectations. The mining group swung to a profit in the first-half thanks to higher platinum prices, but the less-than-bullish outlook caught trader’s attention.

GBP/USD edged a little higher in the wake of the UK’s broadly positive economic announcements. In the first-quarter, the economy grew by 0.5%, in line with forecasts. Business investment in the first three months grew by 0.5%, which smashed the 0.6% decline that traders were expecting. Industrial output and manufacturing output came in at 0.7% and 0.9% respectively, both exceeded economists’ expectations.

Uber (NYSE:UBER) will make its trading debut today, and the stock is expected to price at the lower end of its price range at around $44 to $45 a share, and that would equate to a market capitalisation of roughly $80 billion, and keep in mind traders were speculating about a valuation above $100 billion a few weeks ago.

Symantec (NASDAQ:SYMC) shares will be in focus today after the stock lost ground in post-market trading last night in the wake of it latest quarterly update. The firm revealed a slight dip in fourth-quarter sales to $1.19 billion, while the consensus estimate was $1.21 billion. The group expects next quarterly earnings to be between 30 cents and 34 cents, while estimates were 40 cents. Greg Clark, the CEO, announced his departure last night too, and he will be replaced by Richard Hill, a director, on an interim basis.

London listed, Avast (LON:AVST) shares are in the red on the back of poor Symantec update.

We are expecting the Dow Jones to open 23 points lower at 25,805 and we are calling the S&P 500 down 3 points at 2,867.

DISCLAIMER: CMC Markets is an execution only provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.

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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