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Tesco's turnaround underway

Equity markets in Europe are a mixed bag, and the Spanish market is still losing ground on account of the uncertainty in relation to Catalonia.

The King of Spain took Madrid’s side in the argument, and his failure to condemn the actions of the Spanish police on Sunday is likely to fuel further calls for Catalan independence.

The German stock market re-opened today after Unity Day yesterday, and it certainly played catch-up as the DAX reached a new record-high.

Tesco reinstated its dividend today and the CEO, David Lewis, described it as a ‘significant’ milestone in the company’s recovery. Mr Lewis added that the business is ‘firmly on track’ and he said the same about firm’s merger with Booker Group. Revenue for the first-half rose by 3% to £28.3 billion, and pre-tax profits were £562 million, and that is a serious improvement on last year’s £71 million. The figures are proof that the turnaround plans are working. The dividend may be only 1p, but the image it projects is far more valuable, it gives off the perception the company has turned a corner. Shares in Tesco hit their highest level since April shortly after the open, but quickly swung into the red.

The GBP/USD bounced back overnight and the fast growth rate of the British services sector last month pushed the pound higher. The latest UK services PMI reading was 53.6, up from 53.2 in August. The increase in the growth rate of the UK’s biggest sector should more than off-set the contraction in the construction industry.

The EUR/USD is frim today after the services data from the eurozone showed slightly faster than expected growth.

We are expecting the Dow Jones to open 19 points higher at 22,660, and we are calling the S&P 500 flat at 2534.

At 1.15pm, the US will announce the ADP employment report and the consensus is for 125,000, and that compares with August’s report of 237,000.  


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