Sentiment in Europe is higher this morning even though there hasn’t been any new news to lift investor confidence. US index futures are higher in the wake of the midterm elections and the bullish mood has spilled over to Europe. Italy remains in the news, and this time the coalition partners are at odds with each other security and immigration, but joint Deputy Prime Minister Matteo Salvini claims there is no risk of the administration breaking up. If cracks are beginning to show in the government, that might further erode investor confidence in the country.
Marks and Spencer (LON:MKS) shares are in the red today after the company released disappointing first-half figures. Sales slipped by 3.1%. Like-for-like food and clothing sales dropped by 2.9% and 1.1% respectively. The group is undergoing a major restructuring scheme and sales were disrupted by the closures. More shops closures are planned in the next few years, and the company expects ‘little improvement in sales trajectory’. The less than optimistic outlook weighed on sentiment. The firm’s cash flow jumped by 37.5% and the net debt was cut by 12.3%, which is encouraging. The company had exceptional items of £96.8 million - £47 million were related to store closures. Trading might be subdued for a number of years, but the shift to online sales should benefit the group in the long-run.
J D Wetherspoon (LON:JDW) shares sold-off after the company said it expects full-year profit to be slightly below last year’s level. The pub chain group cited higher wages for the predicted decline in earnings. The unemployment rate has fallen so much, it is starting to put upward pressure on wages. Sales for the 13 weeks until late October ticked up by 5.5% on a LFL basis, and the group plans to open between five and 10 pubs in the current year. The stock has been pushing higher since June 2016, and if it holds above the 1,100p mark, its outlook should remain positive.
ITV (LON:ITV) confirmed that advertising revenue for the first nine months increased by 2%, but it expects revenue in the last three months of the year to slip by 3%. Uncertainty surrounding Brexit was blamed for the cautious outlook, and the rational is that major companies might cut back on advertising in advance of the UK’s departure from the EU, especially seeing as no withdrawal deal has been agreed. The group has been beefing up their video-on-demand business in a bid to compete with Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) Prime. The online platforms will hold more adverting space as ITV hub is becoming more popular.
The US dollar index has sold-off as the Democrats are set to take control of the House of Representatives, and the Republicans will retain control of the Senate. The greenback declined as traders feel life for President Trump will be tricky seeing a congress is divided. Given the success of the Democrats, the chances of additional tax cuts from Mr Trump have decreased.
GBP/USD has been helped by the softer greenback. According to Halifax, annual house prices in the three months until October grew by 1.5% - the softest reading since 2013.
EUR/USD has also benefited from the fall in the US dollar. Italian retail sales on an annual basis fell by 2.5%, and when you take into account the disappointing services PMI reading yesterday, it paints a grim picture of Italy’s economic health.
We are expecting the Dow Jones to open 230 points higher at 25,865 and we are calling the S&P 500 up 28 points at 2,783.
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