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Debenhams hit by another profit warning, trade tensions shake investor confidence

market falling stocks lower bear market

market falling stocks lower bear market

Stock markets are lower as the US and China edge closer to a trade war. 

Tensions are rising as President Trump is lining up tariffs on $200 billion worth of Chinese goods. Washington DC are turning up the heat on Beijing, but the Chinese authorities are not backing down. Investors are running scared, and buyers will be scarce until tensions cool. 

Capita Group has been awarded a Ministry of Defence contract. The company will be running the British military’s fire and rescue service at 78 defence stations in the UK and overseas. Capita also confirmed the sale off its supplier assessment services for £160 million, with the proceeds used to pay down debt. The company had a successful rights issue last month which has helped repair the balance sheet, and lifted investor confidence. The share price has been creeping higher since early April, and if the upward moves continues it could target 215p.

Debenhams shares opened sharply lower this morning after the company issued its third profit warning of 2018. The company now anticipates full-year pre-tax profit to be £35-£40 million, while equity analysts were anticipating £50.3 million. The retailer cited ‘competitor discounting and weakness in key markets’ for the profit warning. Many high street retailers are struggling as tough competition and high rates are hurting their business. The stock dropped to its lowest level in over a decade, and if the bearish move continues it could target 10p.

Ashtead shares are in the red after the company released solid full-year results, but came in just below estimates. Revenue jumped by 17.8% to £3.41 billion, while the consensus estimate was for £3.6 billion. Earnings per share jumped by 22.2% to 126.9p, but equity analysts were anticipating 131p. The firm expanded its Canadian operation greatly and has incurred one-off costs on the back of that, which also weighed on sentiment. The company confirmed it is continuing to ‘perform well in supportive end markets’. Ashtead will maintain its high level of capital expenditure, which tells us how confident they are in their business. The stock gapped lower today, but it did manage to rally over 30% from the March low to the June high, so some profit-taking is to be expected. Today’s gap lower might entice new buyers to enter the fold, and if the wider upward trend continues it could retest the 2400p area.

Mario Draghi, president of the European Central Bank (ECB), was speaking in Sintra, Portugal, this morning. Mr Draghi remains cautious about the timing of the first interest rate hike from the ECB. EUR/USD is lower on the day, and a break below 1.1510 would point to further losses.

Tesla shares will be in focus today the company confirmed last night that a fire in its factory over the weekend halted production for several hours. Thankfully there were no injuries and equipment wasn’t badly damaged. The firm also revealed that an employee has carried out ‘extensive and damaging sabotage’, sending sensitive information to unnamed third parties as well as making changes to the manufacturing operating system.

We are expecting the Dow Jones to open down 337 points at 24,650 and we are calling the S&P 500 down 30 points at 2,743.

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