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Quiet Start To European Session; RBS Slips As Lending Is Squeezed

Published 14/02/2020, 10:47

Stock markets in Europe are subdued this morning following a lacklustre session in Asia overnight. The health crisis in China continues to play on traders’ minds, but international trade is in focus too. The US and China pledged to reduce levies on imports from each other, which should help smooth over the trading relationship between the two countries. The reduction in tariffs are due to take place today.

RBS (LON:RBS) shares have slipped this morning after the posted mixed full-year results. The headline figures looked good as pre-tax profit for the year jumped by 25.8% on an annual basis to £4.23 billion, topping the £4.07 billion forecast. The bank plans to slim-down the size of its investment banking operation – NatWest Market, the unit has underperformed recently, and in the post financial crisis era, many banks have been reducing their exposure to the markets. RBS derives a large portion of its revenue from lending, but the net interest margin rate slipped to 1.99% from 2.09% .Lending is a lower risk business than trading the financial markets, but given the low interest rate environment, income from the activity is likely to remain under pressure in the year head. It was announced that RBS will re-brand itself as NatWest Group alter this year. It seems the company is hoping to shake-off the bailed-out bank image of RBS.

Segro shares have hit yet another all-time all as annual adjusted full-year adjusted pre-tax profits increased by 10.8% Net asset value per share edged up to 8.9% to 708p. The group continues to expand in terms of new developments as floor space increased by 15%. Shareholders were rewarded for their loyalty as the final dividend was upped by 8.7% to 14.4p, which took the full-year dividend to 20.7p – a 10.1% rise on the year.

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AstraZeneca cautioned that its business is likely to encounter disruptions to its business on account of the coronavirus in China – a crucial country in pharmaceutical sector. China plays a large role in the company’s business, first from a logical point of view, and secondly form a revenue perspective. The company said it expects revenue to increase by a high single digit rate to low double digit mark depending on the health emergency in China.

EUR/USD is broadly unchanged today in the wake of yesterday decline, where it fell to its lowest level since May 2017. The German economy experienced 0.0% growth in the fourth-quarter, which was below the 0.1% forecast. On the bright side, the third-quarter growth reading was revised higher to 0.2% from 0.1%. The eurozone as a whole grew by 0.1% in the final three months of 2019, meeting forecasts. The downbeat growth readings are reflected in the single currency today.

Newell Brands will be in focus today as the company will post its fourth-quarter figures. The company released well received third-quarter numbers in November as EPS came in at 73 cents, which easily topped the 55 cents forecast. Sales cooled to $2.45 billion, but it was marginally above the consensus estimate and the full-year guidance was raised too.

We are expecting the Dow Jones to up 52 points higher at 29,475 and we are calling the S&P 500 up 10 points at 3,383.

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