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Europe Rallies On U.S.-China Optimism; WPP Makes Progress On Turnaround

Published 01/03/2019, 09:41
Updated 03/08/2021, 16:15

Stocks market are rallying this morning as renewed hopes about a US-China trade deal, and the possibility of additional targeted liquidity from the European Central Bank (ECB) has lifted investment sentiment. Yesterday, Steven Mnuchin, US treasury secretary, and Larry Kudlow, an economic advisor to President Trump, both issued optimistic statements in relation to US-China trade.

Overnight, China’s manufacturing PMI report was 49.9, topping the 48.5 consensus estimate, and it was an improvement on January’s 48.3. The update wasn’t amazing, but it was a step in the right direction. The manufacturing PMI reports from Germany, Italy and Spain all showed negative growth in February, and some traders see poor economic indicators as a sign the ECB might pursue a policy of extra targeted liquidity.

Rightmove (LON:RMV) share are lower this morning despite the company posting solid full-year figures. Revenue and pre-tax profit jumped by 10%, and traffic to their site increased by 4%. Average revenue per advertiser topped £1,000 per month, and the time spent on the site increased by 5% to 1 billion minutes per month. The fundamentals are solid, but the group is ‘vigilant’ of Brexit, and investors haven’t forgotten about the post EU referendum share price slump.

WPP (LON:WPP) confirmed that annual year-on-year revenue dropped by 0.4%, while analysts were expecting a drop of 0.6%. Headline pre-tax profit declined by 11% to £1.86 billion, which was in line with the group’s forecast. Headline operating margin slipped to 15.3% from 16.4%.The group’s turnaround programme is going well as it made 36 disposals in the past 11 month, and net debt is falling.

William Hill (LON:WMH) registered a full-year pre-tax loss of £575 million, which compared with a profit of £146 million last year. The group previously announced a non-cash impairment of £883 million, which was due to the government regulation slashing the maximum stake on fixed-odds betting terminals from £100 to £2. The firm is looking to the US for expansion and the ambition is to double operating profit by 2023. The existing operations in the US saw net revenue and adjusted operating profit increase by 42% and 91% respectively.

EUR/USD is lower today after German, Italian and Spanish manufacturing PMI reports came in at 47.6, 47.7, and 49.9 respectively – all in contraction territory. The currency bloc continues to be in an economic malaise.

GBP/USD is in the red on account of the firmer US dollar. The mixed UK mortgage data is impacting the pound too. UK mortgage approvals in January were 66,760, which topped the 63,400 forecast, but mortgage lending was £3.66 billion, while economists were expecting £3.9 billion.

Tesla (NASDAQ:TSLA) will be in focus today after the company said it will cut the starting price for the Model 3 to $35,000, and the automaker will close many stores to accommodate the price cuts. The group has over stores and service locations, but it didn’t map out how many will be closed under the new initiative. The stores that remain open will act as an information centre and as a gallery. Investors often welcome cost cutting, but customers might be reluctant to purchase a big-ticket item online, unless they are near a store that stays open.

We are expecting the Dow Jones to open 149 points higher at 26,065 and we are calling the S&P 500 up 16 points at 2,800.

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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