European markets have started the week in a fairly subdued fashion just shy of some key technical resistance levels as investors mull the prospect of higher inflation and rising bond yields as the US 10-Year hits another 4 year high at 2.99%. The US dollar also appears to be catching a bid, hitting its highest level since the 1st March against a basket of currencies.
On the companies front troubled outsourcing company Capita (LON:CPI) has seen its shares surge on the open despite new CEO Jon Lewis announcing a whopping big loss of £513m, while at the same time announcing a £700m rights issue at 70p a share.
The new cash will be used to pay down debt as well as investing in new technology, and overhaul the company from top to bottom. Only last week the company renewed its contract with the BBC to collect the licence fee so while this week’s loss doesn’t make for pleasant reading today’s announcement does appear to suggest that management have a turnaround plan that might work, and the confidence of shareholders in pulling it off.
Also on the FTSE 250, shipping services provider Clarkson (LON:CKN) posted a profits warning for the full year as a result of a challenging shipping market, sending the shares sharply lower. Lower freight rates doesn’t tally with optimism over the health of the global economy, though over capacity in the industry has also been a key factor. The announcement is all the more surprising because it turns on its head an announcement in March that management were optimistic over a recovery in the shipping market. There is the possibility that recent tensions over trade have dented this recovery as customers delay making key decisions.
In Europe Swiss bank UBS posted numbers for its first quarter that beat expectations across the board. Profits rose to CHF1.97bn with the investment bank providing the bulk of the heavy lifting.
This improvement currently sets the bank apart from its European peers and in line with its peers in the US as the surgery that took place a few years ago reaps its dividend. The only downside was in the rates division, which saw revenues decline 11%, not surprising given the negative rate environment in Switzerland and Europe.
Sector peer Deutsche Bank (DE:DBKGn) must surely look on in envy as it wrestles with its own restructuring problems while HNA (SZ:000616), its major Chinese investor cut its stake in the bank to 7.9% as scrutiny over its stake in the bank continues to intensify. Last week Deutsche Bank was in the news again for all the wrong reasons after the bank mistakenly made a €28bn payment to its Eurex settlement account in error.
In the US tech earnings season steps up a gear with the latest Q1 numbers from Google parent Alphabet (NASDAQ:GOOGL), while the oil and gas sector will also be in focus as oilfield services provider Halliburton (NYSE:HAL) updates the market with its latest Q1 numbers.
The rise in the oil price and rig counts is likely to prompt a high bar for Halliburton while the problems in the tech sector with respect to data privacy as well as content could make Alphabet's numbers secondary to concerns about a regulatory crackdown as the EU’s GDPR regulations come into effect.
Dow Jones is expected to open 30 points lower at 24,433
S&P500 is expected to open 1 point lower at 2,669.1
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