Trade concerns are lingering and that is why stock markets are largely mixed this afternoon. 

Europe

It seems the dust has settled in relation to the Huawei situation, but traders are wondering will Beijing hit back at the US. The trading relationship between the two largest economies in the world has been setback and dealers are on edge.    

Marks and Spencers shares are in the red after the company posted a decline in annual profits, and it gave more details in relation to its planned rights issue. Yearly profit fell to £523.2 million, which was slightly ahead of the £519 million forecast. Given that the firm announced over the weekend that profit is likely to fall to the £520 million region, today’s news wasn’t a major shock. In the final-quarter, like-for-like (LFL) food sales dropped by 1.5%, and the clothing and home division registered a 1.3% fall. The retailer cited the timing of Easter for the underperformance in the fourth-quarter. The company intends to raise £601 million from a rights issue, and that will fund the planned joint venture with Ocado. M&S’s food division has traditionally been the strongest department for the group, and the planned tie-up with Ocado should help the firm lift its online exposure.

Pets at Home posted a 6.1% rise in underlying profit before tax to £89.7 million, while the upper end of the guidance was £85 million LFL sales jumped by 5.1% and it appears that the company’s recent restructuring plan helped the company perform ‘well’. The group not only had a solid year in 2019, it began the new financial year with good momentum.

Bovis Homes issued a positive trading statement, whereby the company said that building cost inflation is in the region of 3% to 4%, and that that is impressive as the construction sector has been hurt by higher material costs and skill shortages. The house builder is operating at 87 sites, and its plans to begin work at 16 more site, and the group confirmed that forward sales are strong.

Babcock shares sold-off heavily after a number of exceptional items caused the profit to fall by 47%. Underlying operating profit was fractionally higher, and revenue dipped by 3.8%. The firm cautioned that this year will be ‘challenging’ and that did the damage to the share price, but it is worth noting that net debt dropped and net cash increased by nearly 30%. The stock has fallen to a level not seen since late 2010, and that highlights the bearish sentiment.

US

Equity markets are slightly lower as the US-China trade saga is still playing of traders’ minds. Volatility is likely to be low as traders await the release of the Federal Reserve minutes at 7pm (UK time). The US central bank is likely to use neutral language this evening, as the economy and the jobs market are strong, but inflation is below their target. 

It was a tale of two retailers today as Lowe’s shares sold-off after the company revealed broadly disappointing first-quarter figures. EPS came in at $1.22, which undershot the $1.33 forecast, but revenue came in at $17.44 billion, which narrowly topped forecasts. The firm lowered its full-year EPS outlook to between $5.45 and $5.65, and the previous guidance was for between $6 and $6.10.

Meanwhile, Target’s first-quarter EPS were $1.53, and that exceeded the $1.43 forecast, and the revenue was $17.63, which was slightly above estimates. The same-store-sales jumped by 4.8%, and that topped the estimate of 4.2%, and the group can now boast eight consecutive quarters of same-store-sales growth, and it is keeping up the e-commerce trend as digital sales jumped by 42%.

A Federal judge ruled that Qualcomm broke antitrust laws, and that it suppressed competition in the cell phone market, and the announcement sent the stock tumbling.

FX

GBP/USD is under pressure as Theresa May is under pressure. The Prime Minister has made fresh pleas to MPs to back her deal, but it remains unpopular. The polls ahead of the European elections spell disaster for the Conservative Party, and a poor performance could mean the end of May’s premiership. On the economic front, UK CPI edged up to 2.1% from 1.9%, but the politics is taking precedent today. 

USD/CAD is in the red on the back for the respectable Canadian retail sales figures. The report showed that sales jumped by 1.1% in March, and the consensus estimate was 1% , the retail sales report which strips out auto sales ,showed a 1.7% jump, and traders were expecting an increase of 0.9%. The robust consumer spending suggests that demand is ticking up, and that is likely to prompt the Bank of Canada to sit on their hands in the near-term.    

Commodities

Goldis slightly in the red today as traders tread lightly ahead of the Fed minutes. The metal has been broadly losing ground since mid-February, and the relative strength of the US dollar is hurting the commodity. Gold has been in decline since mid-February, and a break below the April lows, could pave the way for $1,250 to be targeted. 

Oil sold-off aggressively in the wake of the Energy Information Administration report, which showed that US stockpiles jumped by 4.74 million barrels, while the consensus estimate was for a drop of 1.2 million barrels.  

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