US-China trade relations have taken a negative turn as President Trump has threatened to raise tariffs ‘even higher’ if a deal isn’t struck. The announcement from the US president has hit stock markets this morning as traders are gearing up for some sort of tough response from the Chinese government. Beijing has a track record of standing up to Trump so the trading relationship is likely to be strained in the near-term.
Recently we have seen the DAX at 22 month highs, and the CAC 40 at a level last seen in 2007, so the threat from Trump has encouraged traders to exit the equity markets.
Mitchells & Butlers (LON:MAB) shares are in demand today as the company posted a 36% increase in full-year pre-tax profit. Like-for-like sales (LFL) grew by 3.5% while total sales rose by 3.9%. The pub chain said that sales initiatives helped revenue. Competition within the pub trade is intense so it is encouraging to see the firm post respectable sales growth across food and drink. The group has undergone a reorganisation of the group as there were 240 conversions and remodels, which should help it remain popular with customers.
At Kingfisher PLC (LON:KGF) things have done from bad to worse as third-quarter LFL sales have declined by 3.7%, while in the first-half the group registered a 1.8% fall in LFL sales. The company blamed a drop-off in promotional activity, a softer consumer climate, as well as operational issues for the poor performance. The French division continues to muddle along as LFL sales fell by 6.1%. Traditionally the group’s UK and Ireland business has been robust, but the business saw LFL revenue slide by 1%. On the bright side, the Screwfix unit saw low single digit sales growth, but it wasn’t enough to offset the poor performance in mainland Europe. The stock is down 5%.
United Utilities Group (LON:UU) saw a 6.5% increase in first-half underlying operating profit to £392 million, while revenue ticked up by 2%. A fall in costs combined with a target-based incentives helped the company post a rise in earnings. The firm was rewarded by the regulator Ofwat for exceeding its targets, and it expects to build on its solid performance next year.
GBP/USD is slightly lower after the debate between Boris Johnson and Jeremy Corbyn last night. The Conservative Party has been outperforming the Labour Party in the past few weeks, but commentators suggest that last night’s leaders debate was a draw. Sterling is likely to hang onto the gains that were made since September while the pro-business Tories remain ahead in the polls.
EUR/USD is in the red as German PPI slipped to -0.6% from -0.1%. The fall in prices at the factory level suggests that demand is weak, which is worrying as the country narrowly dodged a recession.
Target (NYSE:TGT) will be in focus today as the company will publish its third-quarter figures. The retailer performed well in the first and second-quarters as EPS were $1.53 and $1.82 respectively. Strong growth at the e-commerce division in the last quarter helped the group exceed expectations. EPS for this quarter is tipped to be $1.19.
We are expecting the Dow Jones to open 126 points lower at 27,808 and we are calling the S&P 500 down 13 points at 3,107.
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