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Geopolitics weighs on stocks, Ocado and M&S confirm joint venture

Equity markets are in the red this morning as geopolitics is playing on traders’ minds.

President Trump is set to meet with the North Korean Leader, Kim Jong-un, to discuss the denuclearisation of the Korean Peninsula. Investors are still wondering when will the US-China trade spat will be resolved. We heard this week that tariffs on Chinese imports won’t be hiked in March, but the trade dispute still needs to be finalised, and we are still a long way from the end result.

Marks and Spencer will pay £750 million to Ocado for a 50% stake in the joint venture. M&S intend to raise up to £600 million from a rights issue, and cut their dividend in order to fund the investment. From September 2020, Ocado’s website will no longer offer Waitrose products. The move should give M&S exposure to online sales, and the cash raised by Ocado will be ploughed into their infrastructure. The deal should benefit both parties as M&S need to play catch-up in the area of online sales, and Ocado need additional investment funds to ensure their operation can cope with all their new contracts.

Ted Baker shares sold-off this morning after the company issued a profit warning. The fashion house announced that it expects full-year pre-tax profit to be roughly £63 million, while analyst were predicting £74 million. The company cited an unexpected inventory write-down, adverse foreign exchange movements and extra product cost for the lowering of the guidance

Rio Tinto reported solid full-year figures today. Underlying earnings edged up 2% to $8.81 billion, topping the forecast of $8.47 billion. The company continues to dispose of assets, and $8.6 billion was raised from asset sales, and that helped fund the generous pay outs to shareholders. The final dividend was $1.80, and a special dividend of $2.43 will declared too. The company has learned from the mistake of the mining boom, when it over borrowed and over bought, and now its strategy is to focus on ‘value over volume’. The stock has been pushing higher since December, and a break above 4,540p, might bring the 4,700p region into play.

EUR/USD is largely unchanged today. Italian consumer confidence slipped to 112.4 in February, and it undershot the forecast of 113. 

Lowes will be in focus today as the company is due to announce its fourth-quarter results. In November, the company announced third-qaurter same store sales that undershot analysts’ estimates. The sector has been struggling lately as higher interest rates and softer house prices have weighed on the industry. It is worth noting that Home Depot revealed disappointing figures yesterday.   

We are expecting the Dow Jones to open 107 points lower at 25,950 and we are calling the S&P 500 down 11 points at 2,782.  

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