Markets in Europe have followed on from losses in the US and Asia, opening lower this morning as the hangover from yesterday’s disappointing PMI’s and US ISM data continues to ripple out across global markets.
The declines now appear to be accelerating on rising concern that the ongoing deterioration in the manufacturing numbers will at some point start to manifest itself in the much larger services sector. We will find out more later this week with the release of the services numbers, however the longer the weakness in manufacturing goes on the more likely this weakness will be seen in services.
The recent weakness in economic data has prompted German Institutes to cut their growth forecasts for 2019 and 2020 to 0.5% and 1.1% from 0.8% and 1.8% respectively. They have cited disputes over trade and Brexit risks as the main reasons for their pessimism.
On the companies front it’s a big day for resignations with Martin Gilbert announcing his departure as vice Chairman from Standard Life (LON:SLA) Aberdeen, while Dave Lewis has announced his departure as CEO of Tesco (LON:TSCO).
In the case of Tesco (LON:TSCO) the silver lining is a decent set of first half numbers which has seen revenues and profits come in ahead of expectations. The timing of the departure is also a curious one with Mr Lewis citing personal reasons, though he won’t be departing until next year.
He will certainly be a hard act to follow, given that under his guidance he pulled Tesco (LON:TSCO) back from the precipice. It therefore makes it all the more puzzling that the Tesco board have decided to go with an outsider to replace him. A lack of confidence in the existing management structure perhaps? Only time will tell but the fact they’ve gone with an outsider is a strange one.
Nonetheless investors appear to be focussing on the better than expected numbers, and the fact that he is staying in post for a while yet, with the shares pulling back after initially opening lower.
Flutter Entertainment PLC (LON:FLTRF) shares have also risen strongly on the open after the announcement with the Canada based Stars Group to create a global leader in sports betting and gaming, with a combined annual revenue of £3.8bn.
Metro Bank shares haven’t reacted to the news that Vernon Hill is stepping down as Chairman of the group in what some investors are likely to see as a long overdue move.
The pound has come under pressure as pessimism grows about the nature of any new UK proposals to deal with the issue of the Irish border. The proposals which are expected to put forward the idea that Northern Ireland would remain in parts of the EU single market until 2025, with other regulatory checks to be carried out at points of origin or destination.
There appears to be rising scepticism judging by the mood music coming out of Brussels that any deal is likely to be agreed in the days ahead, however this is entirely normal when it comes to all matters Europe. Deadlines always have a habit of getting pushed to the wire.
US markets look set to open lower today on the back of the weakness in European markets this morning and ahead of the latest ADP (NASDAQ:ADP) payrolls report which is expected to show that private sector jobs growth slowed in September to 140k, from 195k in August.
On the earnings front we have the latest from Ford Motor (NYSE:F) company, whose share price has had a couple of attempts to get above $10.50 this year, failing on both occasions as concerns over trade hit its profits. In July the company announced a $1.2bn charge in respect of global restructuring costs, as it looks to close plants in Europe, while also deepening ties with VW into what will be driverless car technology start up called Argo AI. Trade concerns have hit Ford quite hard, not only in Europe, and China, but in Mexico as well, with President Trump calling on the company to re-shore its manufacturing activity.
Sales have been struggling in recent quarters due to a variety of factors, including a host of product recalls, including on its popular Explorer model, in its core US markets.
Dow Jones is expected to open 105 points lower at 26,468
S&P500 is expected to open 13 points lower at 2,927
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