European equity markets bounced back today following the severe sell-off endured yesterday. There are reports that Matteo Salvini, Italy’s joint deputy prime minister, could be prepared to review the government budget proposal. Traders are viewing this as a sign of optimism, as it leaves open the possibility of avoiding a political fight with Brussels. The EU might decide to financially punish the Italian government today, but they need to tread lightly as it could put pressure on the fragile Italian government bond market. Theresa May is expected to meet with the EU’s Jean-Claude Juncker today, and that will be in focus too.
Kingfisher (LON:KGF) shares are in the red after the company confirmed that the French operation is still struggling. Third-quarter like-for-like (LFL) sales at the unit dropped by 7.3%. The group has implemented a turnaround plan for the division, but investors are likely to remain cautious until they see a turnaround. The company’s British business is still the top performer, although B&Q LFL sales dropped by 2.9%. Screwfix, which is more trade focused registered a 4.1% rise in sales. The company is going to shut it operations in Russia, Spain and Portugal, in an effort to focus on its core markets. The stock has been in decline for over two years, and if the bearish move continues it could target 200p.
Sage (LON:SGE) shares opened lower even though the company announced respectable full-year results. Revenue increased by 7.6% and pre-tax profit jumped by 16.4%. Investors have been wary of the stock this year, as the group underperformed under the leadership of the previous CEO, Stephen Kelly. Steve Hare is the new CEO and he is going to devote more resources to cloud computing – which is a major industry. The share price has been in decline since January, and if the negative move continues it might target 482p.
Johnson Matthey (LON:JMAT) shares are in demand after the group posted a 19% increase in first-half pre-tax profit. The firm also issued a bullish outlook, as it anticipates that operating performance growth to be at the upper end of the guidance. The interim dividend was raised by 6.9%, and this is a clear sign the company are confident in their earnings ability. The stock has been in a downtrend since June, but if it can hold above the 2,750p mark it might retest the 50-day moving average at 3,180p.
GBP/USD hasn’t moved much today as volatility across the currency markets are low. Brexit uncertainty still hangs over the pound, so traders will be keeping an eye on political developments. UK government borrowing jumped to £7.95 billion last month, which topped the £5.35 billion forecast. There was a muted reaction to the borrowing figures.
Sears (NASDAQ:SHOS) will be in focus today as the company is expected to release their third-quarter results. Investors have low expectations as the retailer filed for bankruptcy protection last month. The firm has over $5 billion in debt, and it needs to implement a drastic restructuring plan to try and stay afloat.
We are expecting the Dow Jones to open 120 points higher at 24,585 and we are calling the S&P 500 up 14 points at 2,655.
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