Trade tensions rumble on and that has weighed on market confidence.
Europe
Seeing as the US have taken a tough stance against Huawei, traders are not hopeful that the US-China trade dispute will be resolved quickly. The rally at the back end of last week it starting to look like a relief rally, and this move could be the beginning of the next major move lower. While the US-China trade situation remains in limbo, sentiment is likely to be poor.
Ryanair’s profit has fallen to a four year low, and the airline blamed tough competition and uncertainty surrounding Brexit as the reason for the 29% drop in full-year earnings. The group’s outlook undershot analyst’s forecasts too, and the company now expects full-year profit to be between €750 million, and €950 million, while analysts were anticipating €977 million. The stock has taken been hit by the news, but when you consider that easyJet’s first-half loss widened, and Thomas Cook is struggling so badly they are trying to sell-off portions of the business, Ryanair are in a relatively strong position. Aiming to make a few hundred million euros next year is still good when you consider the environment.
Sticking with the travel sector, Thomas Cookshares have tumbled again after last week’s turbulent time, and the fact the firm has to reassure its customers that its ‘business as usual’ has weighed on investor confidence.
Low & Bonar shares have slumped today after the group cited trade tensions between the US and China as the reason for ‘uncertainty in the Chinese market’. The group warned on profit, and stated that its CEO, Philip de Klerk, will be stepped down. The group won’t be rushing out to find a replacement, and the turnaround plan that was launched last year isn’t progressing at the rate management would like. The firm is looking to sell its civil engineering business, and it confirmed the process is going well. The stock has dropped to an all-time low, and that sums up how investors feel about the company, and the stock is likely to struggle until management map out their plans.
HSBC downgraded Merlin Entertainments from buy to reduce, and they cut their price target from 450p to 315p. The group announced it will open a Madame Tussauds in Prague, Czech Republic, later this year, but investors paid more attention to the broker downgrade. Given that some consumers are spending less on holidays, that might be the reason behind the broker downgrade, but the other hand, Merlin might benefit from Brits spending more time and money at home.
Foxtons share price has gone from bad to worse today as the London-focused estate agent confirmed that first-quarter volumes were at a record low. The company is paying the price for being London-centric as the particular market is cooling after years of massive price growth. Some potential house buyers are probably holding off due to the dip in London house prices and uncertainty surrounding Brexit. The stock listed in late 2013, and after topping out in February 2014, the stock has been in a downward trend since then, by contrast, Rightmove – who operate UK wide, saw their share price hit a record-high last week, so Brexit can’t be blamed for everything.
Deutsche Bank shares hit a record low after UBS cut its outlook on the stock to sell from neutral, and it lowered the price target to €5.70 from €7.80.
US
US stocks are under pressure as the stalling of US-China trade talks is encouraging investors to exit the stocks. The tech-heavy NASDAQ 100 has lost the most ground as the fall-out from the Huawei case has rippled out across the sector.
The Huawei equipment ban in the US has hit the chipmaker sector hard, and Lumentum downgraded its fourth-quarter to between $375 million and $390 million, and the previous guidance had a mid-range of $415 million. The previous EPS outlook was had a mid-range of $0.92, and now the range is between $0.65 and $0.77. Other stocks like Micron Technology, Infineon and Broadcom have lost ground too.
Tesla shares are in the red after an analyst at Wedbush cut his price target for the stock to $230 from $275. The equity analyst has concerns about the company’s ability to reach its production target. Tesla hopes to deliver between 360,000 and 400,000 cars this year, and keep in mind it delivered 63,000 in the first-quarter, and its record quarterly production was 90,000 cars in the final quarter of last year. The company seems to be going in reverse when it comes to production, and it needs to be setting new quarterly records in order to achieve its ambitious annual target.
FX
It was been a quiet day on the currency markets and the US dollar index as dipped a little ,but keep in mind it had a positive run last week. Even though the US is at the centre of the trade concerns, the greenback has been broadly popular as it is often deemed to be a safe haven currency. GBP/USD and EUR/USD have moved much today as there was an absence of major macroeconomic news.
Commodities
Gold hasn’t moved much today as the lack of volatility in the US dollar has prompted a similar situation in the metal. Gold’s inverse relationship with the US dollar has been strong lately, and gold remains in the downward trend that it has been in since February, and a break below the $1,266 region is likely to pave the way for further losses.
Oil has risen after Saudi Arabia suggested that OPEC is likely to maintain its production cuts, and the fear that supply will remain under pressure has prompted traders to snap up oil. Tensions between the US and Iran are heating up too, and that is playing into the mix as well.
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