FTSE nudges higher against the backdrop of bubbling trade tensions
Having lost 0.8% on Wednesday the FTSE continued to slide this morning, opening down 0.2% as trade tensions bubbled in the background. The US and Canada are still in the process of negotiating the finer points of a new North American trade pact and although negotiators have made some positive noises it is too early to make any conclusions, given that talks ground to a halt abruptly last Friday.
Also, the public consultation on the USA’s new trade tariffs on China is due to close today and if the US goes ahead China is likely to respond in kind.
Euro losses ground as German factory orders fall
The euro lost its footing against the pound and the dollar after German data showed that factory orders dropped unexpectedly in July as foreign orders declined.
The mighty German car industry is falling prey to the dispute between the US and the EU over trade tariffs after the US increased tariffs on imports of European cars. Though German Chancellor Angela Merkel indicated that she is willing to reduce tariffs on the import of US cars into Europe, but that fundamentally an agreement will have to be negotiated by the whole block and not Germany alone. In July new manufacturing orders rose 0.9%, instead of rising 1.8% as analysts had predicted.
The drop in orders already follows on a bad June when orders were cut by almost 4%. The euro weakened 0.04% against the dollar and 0.13% against the pound. Sterling, however, held its ground against the greenback to trade up 0.11%
Melrose rallies post results
Melrose (LON:MRON) is high among FTSE risers this morning, rallying 3.82% after reporting its half year results. The numbers didn’t make clear reading as Melrose said that it made a statutory loss of £303 million because of charges related to the acquisition of engineering group GKN (LON:GKN) but didn’t provide information on how high those charges were. However, the turnaround specialist said it has made significant progress in restructuring GKN which it bought in a hostile £8 billion takeover earlier this year. Melrose reportedly plans to auction off GKN's metallurgy business later this month and is still mulling options for its off-highway powertrain unit and wheels business.
Go Ahead Earnings Release
Unfortunately for transport companies like Go-Ahead (LON:GOG) advances in technology have made us a more sedentary bunch. Workers are increasingly operating from home, while the rise of online shopping is making trips to the shops obsolete.
Changing consumer habits are putting more pressure on the likes of Go-Ahead to lure travelers with a comfortable and reliable service.
The company has done well to squeeze out a profit increase at its bus division after it improved its on-time performance in London, where buses remain a cheap and popular means of getting around.
But the disastrous timetable change introduced in May at Govia Thames Railways link has taken a toll on profits and the fallout will linger into the new financial year due to the reputational damage it caused.
Go-Ahead is claiming the widespread failings triggered by the timetable change were industry-wide. But in an ominous admission, it has accepted that Transport for London could find the company solely responsible -- and that could mean paying fines or even losing the contract.
It'll be crucial for management to continue improving the standard of the Govia service over the coming weeks and months. The government will have little patience for another slip up.
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