European markets have opened mixed this morning shrugging off a disappointing session in Asia, where the reaction to last night's Fed minutes was anything but positive. Japanese trade export numbers, which showed a decline of 1.2% in September, also pointed to a slowdown in economic activity in Asia.
It has been suggested that the impact of Typhoon Jebi, and latterly Trami may have disrupted economic activity across the region, which seems plausible, however with all the concerns about trade, investors don’t appear inclined to give the numbers the benefit of the doubt.
Nonetheless the hawkish interpretation of the latest Fed minutes has pushed the US dollar back towards the top of its recent range and pushed US 10 year yields back up to the 3.2% level.
The worst performers in initial trade have seen CRH PLC (LON:CRH) and Ashtead (LON:AHT) slip back sharply, probably due to a disappointing reaction to the latest guidance from US sector peer and equipment rental company United Rentals, which saw its shares slide 6% after hours.
There’s been a lot of optimism around tech sector earnings over the past few days, however old tech like IBM (NYSE:IBM) earlier this week appears to be struggling to keep up with the newcomers in terms of reorienting their business away from legacy tech, towards the growing moves towards the cloud. T\his morning German software giant SAP (DE:SAPG) also appears to be experiencing similar issues after reporting that while revenues rose 8% from over a year ago, driven by a 41% climb in cloud subscription. The downside was an 8% decline in revenues in its legacy business which helped drag operating profits lower by 6%.
Having come off the back of a bloody nose from shareholders, about their head office relocation plans, Unilever (LON:ULVR) management announced their latest numbers for Q3, which showed that despite modest price increases of 1.4%, sales managed to hold up reasonably well, rising 3.8% across the regions. This was below consensus expectations of 4.3%, which is probably why the shares have slid back on the open, however guidance for the year was kept unchanged.
Even in Brazil where the company had a disappointing Q2 sales picked back up, after the disruptions caused by a strike by lorry drivers. The price growth numbers from Argentina were excluded due to the hyperinflationary status of that economy, which would have introduced an enormous skew on the overall numbers.
On balance the numbers show that the business is doing well, though not well enough given that the consensus around the forecasts was for 4.3% growth across the regions. Combined with the recent botched attempt to relocate the company’s HQ these numbers reinforce the uncertainty around the futures of the CEO Paul Polman and Chairman Marijn Dekkers, whose judgement has been questioned about the overall strategy of the business.
Domino’s Pizza (LON:DOM) latest trading update showed that group sales for the 13 week period to the 30th September rose 5.9%, as the UK’s appetite for takeaways showed no signs of abating, despite the hot summer weather. The company announced plans to hire an additional 5,000 staff to cover the Christmas period. On-line sales rose 11.4% and represented 78.3% of sales during the period.
The pound hit a one week low against the US dollar despite reports that the UK government was open to extending the Brexit transition period beyond 2020. This appears to be more about a rise in the US dollar than any sterling weakness, as the pound gained ground against the euro.
The softer tone in Asia, along with a slightly weaker open in Europe is set to weigh on US stocks on the open, with the latest earnings from the likes of American Express (NYSE:AXP), Bank of New York Mellon (NYSE:BK), Paypal and Philip Morris (NYSE:PM).
Weekly jobless claims are expected to show come in at 212k, down slightly from 214k while the latest Philadelphia Fed survey for October is expected to dip modestly from 22.9 to 20.
Oil prices have remained under pressure after yesterday’s surprise bigger than expected build in US inventories, with Brent crude prices back below $80 a barrel, and close to one month lows. This is also welcome news for consumers who have had to absorb higher fuel prices in the past few months, and if sustained could prompt further downward pressure on inflation.
Dow Jones is expected to open 16 points lower at 25,690
S&P500 is expected to open 3 points lower at 2,806
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