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Huawei waiver offers up hopes of trade war compromise

European markets got off to a positive start this morning after yesterday’s sharp sell-off, with banks leading the gainers after the US issued a 90-day waiver to Huawei to continue supplying software updates and hardware maintenance to US and other companies, to ensure the integrity of the current infrastructure and security of its users.

While it’s a small measure, it does perhaps symbolise there might be a reverse gear from the current slide to what could turn into a full-blown trade war between the US and China, that could drag the whole global economy down in its wake.

WH Smith share price declines as CEO departs

WH Smith used to be a well-recognised brand on the UK high street and to some extent still is, however the company’s retreat from the high street to transport hubs has helped insulate it from the worst of the retail sector's woes, as total group sales over the quarter rose 15%.

To give an indication of this move away from the high street, WH Smith has over 1,600 stores, with only 599 situated in town centres. Despite that, the high street business still remains its achilles heel, with total sales in that division declining 1% over the period. The move into Post Office franchising has helped margins improve, with 184 outlets now open, including 17 new locations. The travel division on the other hand has continued to outperform, with total sales rising 26% across a range of locations, comprising 425 international units including the Middle East, Australia, south-east Asia, the Americas and India.

Investors appear to have ignored the wider numbers reacting to the news that CEO Simon Clarke is leaving after six years, helping to push WH Smith's share price to a four-month low.

Cycling sales rise fails to boost Halfords share price

It would appear that a mild winter has helped Halfords post a better-than-expected performance from its retail division, as cycling rose 2.6% in like-for-like sales, not that you'd know it from Halford's share price reaction today. This outperformance had an offsetting effect as motoring took a dip, due to lower sales of winter-related products, which saw a drop of 0.4% on a like-for-like sales basis.

More broadly, the company had a solid year with online sales rising 9.5% and margins also improving, as group revenues showed a modest increase on the year, coming in at £1.14bn. Profits, on the other hand were down by £12.8m from a year ago to £58.8m, which was a little disappointing, though should be set in the context of higher motoring sales and revenue from a year ago, when the 'beast from the east' prompted a higher motoring sales mix. The company also reduced its debt levels by £6m to £81.8m.

In what is disappointing news for competition in the UK banking sector, Tesco have announced this morning that it will be withdrawing from the mortgage market. As with any business, the potential for growth depends on the ability to forecast a clear path in terms of profit growth. The decline in yields, as well as a tough housing market, appears to be making that process much more difficult to manage, and as such Tesco appear to have decided to call time on it. The company will also be looking to find a buyer for the total lending balances of £3.7bn.

The slowdown in housing and construction sectors doesn’t to be holding back Galliford Try which has posted a decent trading update for the year to date, prompting a decent rally in the share price. Linden Homes continues to perform well, albeit with a slightly slower sales rate, and selling prices. Management say they expect to see this year’s performance to be in line with expectations.

In the wake of recent events today's Metro Bank AGM is likely to be a feisty affair. For the second year running Legal and General Investment Management will vote against Vernon Hill as chairman of the beleaguered bank, on the basis that it has longstanding concerns about its governance. Given recent events, these concerns are entirely valid and despite the bounce in Metro Bank's share price in the wake of last week’s capital raising, it's quite clear that the bank could do with new management, seeing as that in the last 12 months the bank has lost nearly £3bn of its market capitalisation.

US markets, having seen a sharp sell-off yesterday on the back of the Huawei escalation, could see a rebound as a result of the waiver by the US commerce department.

Tesla's share price is likely to be in focus after yesterday's heavy declines, as concerns rise about the company’s ability to deliver on its production targets this year. Quite why it’s taken investors this long to realise that the company’s production target was unrealistic, given that it was well known over a month ago, is a little puzzling, but better late than never I suppose.

Home Depot shares in focus later

DIY chain Home Depot's share price is also expected to in focus later today. Last year the company posted record sales in 2018, a rise of 7.2% to $108.2bn, a decent performance not really reflected in the share over the last 12 months. The company appears to have benefited from a struggling US housing market, as consumers decide to spend money on improving their existing home, rather than move to a new one. Its forward guidance was also positive in moving expectations for the fiscal year 2020 for total sales of $115bn to $120bn, however it would appear that investors were hoping for more. As a bellwether of the US economy and the US consumer, how Home Depot does in this latest update is likely to offer clues as to where the US economy is heading over the next quarter. Profits are expected to come in at $2 18c a share, up from $2.09c at the end of Q4.


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