European stock markets are slightly higher this morning as traders remain cautiously optimistic.
A US trade delegation is on its way to China, and dealers will be watching the situation carefully as a possible trade war can’t be ruled out.
We will find out tomorrow whether the US will impose sanctions on EU products. The likelihood of this happening is low, but traders aren’t taking anything for granted.
Sainsbury’s shares are up 15% after the company announced plans to merge with Asda. The move is subject to regulatory approval, but should it go ahead it would be worth £7.3 billion. Increased competition from Aldi and Lidl is main motivation behind the proposed deal. The deep-discounters have disrupted the UK supermarket sector severely, and now have a combined market share of approximately 12%. Sainsbury’s and Asda are the second and third-largest supermarkets by market share, and should the deal go ahead, it would put them in first place. Sainsbury’s predict it will save £500 million through synergies. The retailer also updated the market with its full-year figures, as underlying pre-tax profits rose by 1.4% to £589 million, which was comfortably ahead of the £559 million expected.
WPP shares are in demand this morning after it released better-than-expected sales figures, while the advertising giant also stated a strategic review was underway. First-quarter net sales dropped by 0.1%, while analysts had expected a decline of 1%. The company also said it would take a ‘fresh look’ at business in light of Sir Martin Sorrell stepping down earlier this month. There is talk WPP could spin off assets, but nothing has been confirmed, and no timeline has been stated.
EUR/USD is in the red as the euro remains weak. On Friday, the single currency dropped to its lowest level since mid-January after European Central Bank president, Mario Draghi, gave a slightly dovish update on Thursday. Germany posted a 0.6% drop in monthly sales last month, while economists were expecting an increase of 0.8%. These figures confirm Mr Draghi’s concerns the region is slowing down.
At 1.30pm (UK time) the US will release the latest core personal consumption expenditures (CPE) index, and the consensus is for a reading of 1.9%, up from 1.6% in February.
We are expecting the Dow Jones to open up 124 points at 24,435 and we are calling the S&P 500 up 12 points at 2,681.
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