Markets rise on Japan stimulus, ITV / Taylor Wimpey results

‚ÄčTalk of fiscal stimulus in Japan, data showing stronger-than-forecast UK economic growth and mostly better than expected corporate earnings offset Fed jitters in early Wednesday trading.

Talk of fiscal stimulus in Japan, data showing stronger-than-forecast UK economic growth and mostly better than expected corporate earnings offset Fed jitters in early Wednesday trading.

The FTSE 100 is trading just shy of its 2016 highs but remains inside its recent sideways price range near 6,700. Gains are being led by housebuilders and ITV after the firms maintained optimistic forecasts for the year despite the EU referendum vote.

Japanese Prime Minister Shinzo Abe announced plans for massive $28trn yen in stimulus according to reports, though the amount of new money in the package is unknown. The announcement has caused considerable turbulence in the Japanese yen following the disappointment yesterday that a much smaller package was being considered. The yen pulled back from its initial losses after the report was released because opinion is divided over whether more fiscal stimulus necessarily means more monetary stimulus to boot.

ITV shares jumped after the TV company reported a 9% leap in profits for the first half of the year and guided that advertising revenues would fall less than expected. It’s a bit too soon to tell but the report is some early evidence that the much feared Brexit-induced advertising spending decline will not be very severe.

Shares of Taylor Wimpey rose after the homebuilder reported operating profits rose by 9% through July with no difference seen from the Brexit vote.. In further evidence the housing market was resilient before the Brexit vote, Rightmove beat revenue estimates according to a trading update.

Shares of Deutsche Bank tumbled after bank reported a painful 98% y/y plunge in net profits and suggested more cost cutting would be needed. Restructuring charges and a write-down made up the bulk of the profit decline but trading revenues were also well down. The poor trading performance from Deutsche is particularly disappointing given the improvement seen at most of the US banks. It may be that DB’s deteriorating capital position is impacting its desirability as a counterparty.

US stocks look set to rise on the open thanks an expected jump in Apple shares after the tech giant sold more iPhones than expected in the second quarter, helping profits and revenues beat expectations.

Whilst the results beat expectations, they confirm an ongoing slide in iPhone sales as customers hang onto their smartphones for longer. Notably the Apple Watch is not making up the lost ground with the “other” category which includes the watch seeing revenues decline. Excluding moon-shot projects like the electric car, the best hope for future Apple growth appears to lie with its services. Apple Music and Apple Pay face intense competition and won’t have the comfortable margins enjoyed by the iPhone.

Shares of Twitter are expected to open sharply lower after it reported a modest rise in users and warned advertising demand was not as high as anticipated.

USA pre-opening levels

S&P 500: 4 points higher at 2,173

Dow Jones: 45 points higher at 18,518

Nasdaq 100: 29 points higher at 4,701


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