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Dismal German manufacturing report sends stocks and euro lower

European equity markets sold-off this morning after France and Germany posted disappointing economic announcements. 

The French services and manufacturing sectors are in contraction, and the German manufacturing industry reported its lowest reading since July 2012. All the focus has been on the UK regarding Brexit, but the eurozone is struggling, and the last thing Continental Europe needs is a no-deal Brexit.  

Deutsche Bank shares were higher this morning after the bank said it expects revenue to be slightly higher this year, as the investment banking unit is expected to eke out a small increase in revenue. The troubled bank still has problems as its capital position is likely to be negatively impacted by pending supervisory assessments. On the litigation front, many uncertainties still exist, and expenses are tipped to be ‘significantly’ higher than in 2018. Despite the dismal share price performance in recent months, it has been announced that the management will get paid a bonus –the first in four years. The talk of a merger with Commerzbank is still doing the rounds, and it has split political opinions, but two weak banks are unlikely to make one strong bank. After a positive start, the share price turned red.

Smiths Group confirmed that it will spin-off the medical devices unit via a stock market listing. The group attempted to merge the unit with ICM Medical last year, but both sides were unable to strike a deal. The firm believes that opportunities will be maximised from the demerger. Smiths Group said full-year underlying profit slipped by 2%, while underlying revenue edged up by 2%.

Aggreko shares are in demand after a couple of broker upgrades. Jefferies increased its price target to 1,170p from 1,100p, and Stifel raised their rating from hold to buy, and upped the price target to 880p, from 840p.

In terms of share price action, it has been another disaster for Debenhams as the company is trying to secure £200 million from existing lenders in a bid to try and halt Mike Ashley’s advances. The struggling retailer is doing all it can to remain free from the clutches of Mr Ashley, but it is coming at the cost of the shareholder.

EUR/USD sold-off sharply in the wake of the disappointing PMI updates. French manufacturing and services were 49.8 and 48.7 respectively, while German manufacturing PMI was 44.7. The pitiful economic updates weighed on the single currency.

Nike sales will be in focus today after the company released solid third-quarter figures last night. Adjusted EPS were 68 cents, which topped the 65 cent forecast, and revenue was $9.611 billion, broadly in line with forecasts. The Converse brand saw a 2% dip in sales, and that worried some investors.

We are expecting the Dow Jones to open 107 points lower at 25,855 and we are calling the S&P 500 down 11 points at 2,844.      

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