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Trade tensions persist, IWG warns on profit

market relief

market relief

Stock markets are in the red as trade fears persist. 

Investors are getting nervous again because of the situation between the US and China, and there is a growing concern that the EU will be next in line for the Trump treatment.

Whitbread shares are slightly higher this morning after the company had a mediocre first quarter. Total group sales jumped by 3.2%, but that was down to opening new hotels and coffee shops. Like-for-like (LFL) sales at Premier Inn and Costa Coffee fell by 0.9% and 2% respectively. It is worth noting that Costa Coffee express machines are eating into store sales. Nonetheless, it is worrying when sales growth is only being achieved through expansion. On a positive note, the company confirmed that LFL sales in China are growing. The firm also announced that the demerger plans are going well, and that it could take up to two years to complete. However, activist investor Elliott Advisors feel the spin-off of Costa Coffee should only take six months.

IWG shares are in the red after the company warned that operating profit would fall below management’s previous expectations by between £15 million and £20 million. The performance of the UK division has fallen shy of management projections. The firm took on more office space than initially expected, and this led to the profit warning. The workspace company spent £230 million increasing its floor space, intending to spend only £200 million. The timing of the announcement isn’ t ideal as the company is at the centre of a bidding war. The stock has been broadly pushing higher since late 2017, and if the bullish move continues it could target 350p.

GBP/USD in under pressure ahead of the Bank of England’s financial stability report, which is due later today. According to Nationwide, UK house prices grew at their slowest rate in five years. The report showed that annual house prices rose by 2%, still higher than economists were expecting at 1.7%. May’s report, however, came in at 2.4%.

EUR/USD is largely unchanged this morning, while  French consumer confidence slipped to 97 from 99.

AeroVironment shares will be in focus this afternoon after the firm’s forecasts failed to live up to market expectations.

We are expecting the Dow Jones to open down 130 points at 24,153 and we are calling the S&P 500 down 9 points at 2,714.

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