European stock markets are a mixed bag today as dealers await the next development in the geopolitical situation.

Although tensions between the US and China over the trade dispute have cooled, it is still on traders’ minds, and that is why we are seeing a small bit of profit-taking this morning.

Russia in still in the bad books of the US, and the Syrian situation is also weighing on the global political outlook. Investors will be keeping an eye on the Federal Reserve minutes at 7pm (UK time), when the market will get a better idea about the US economic outlook. 

Tesco shares are higher this morning after the company announced annual profits of £1.3 billion, while the forecast was for £1.1 billion. The retailer aggressively cut profits and more savings are in the pipeline once the synergies from the Brooker Group takeover kick in. Revenues increased for a ninth consecutive quarter, which is impressive considering the subdued trading environment. The pension deficit and debt position were cut, and it pledged its first final dividend in nearly four years. The share price hit a level not seen since August 2015 this morning, and if the bullish sentiment continues it could target the 250p area.

ASOS shares sold-off this morning after the company revealed a rise in profits and capital expenditure. The company stated first-half profits and revenue jumped by 10% and 27% respectively. Sales growth outside of the UK is growing at a faster rate than at home, which is encouraging to see, as Britain is its largest market. ASOS plans to ramp up capital expenditure by between £230 million and £250 million in the next two years, and dealers dumped the stock on the back of this. The expansion plans clearly show the company is confident in its ability, and is likely to be a long-term gain. If the share price holds above 6308p (200-day moving average), the outlook could remain positive.

The softer US dollar index is assisting EUR/USD and GBP/USD. The greenback has been in the firing line recently due to the strained political tensions the US has with both China and Russia. Italian retail sales on an annual basis slipped by 0.6%, and that was a slight improvement on the 0.8% decline in January. The UK revealed mixed economic data this morning. Construction output fell by 3%, while manufacturing output and industrial output increased by 2.5% and 2.2% respectively.

At 1.30pm (UK time) the  latest US CPI data is released, with consensus estimates pointing to a reading of 2.4%, which would be an improvement on the previous reading of 2.2%.

We are expecting the Dow Jones to open down 108 points at 24,300 and we are calling the S&P 500 down 14 points at 2642.

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