After their worst declines this year with the FTSE100 falling over 3%, its worst one day fall in three years, European markets have opened cautiously higher ahead of what is likely to be some key services data later this morning.

Markets in Asia followed on from a weak US session after the US announced a new raft of tariff measures on a range of European goods in response to the WTO findings yesterday that they were entitled to levy $7.5bn of tariffs in response to subsidies that were used to help Airbus.

With markets already looking vulnerable over concerns about a manufacturing recession starting to bleed into a slowdown in the services sector, the timing of the WTO ruling could not have come at a worse time for already jittery investors, along with the US response to apply tariffs to a wide range of goods including malt whisky, French wines, and a range of food items, from October 18th.

Today’s services data for September would appear to suggest that evidence of any trickledown effect from manufacturing at the moment is increasing slowly. Spain and Italy services data came in at 53.3 and 51.4, while in France economic activity slowed to 51.1, and Germany to 51.4.

There must be something in the water this week, having seen three of the UK’s most senior executives announce their departure yesterday, Imperial Brands joined in this morning by announcing the departure of their own CEO, Alison Cooper, after nearly ten years in the role. She became CEO in March 2010.

The timing of the move is curious given that the company is facing some serious headwinds as we move into the end of the year and look to 2020. Last week the company saw its share price fall sharply to nine year lows after the company announced that it was cutting its revenue guidance on the back of concerns that the health problems now being expressed about vaping could result in a sharp slowdown in sales.

In August we heard early reports about a series of deaths from the 18-35 age group which may have been linked to vaping. These reports have now turned into a torrent and ultimately nixed the recent attempts by Altria and Philip Morris to come back together after an 11 year separation.

The tobacco industry is now facing the prospect of an existential crisis, with a crackdown on normal cigarettes already cutting into profits, e-cigarettes were supposed to be the next key growth area. This strategy now appears to be under threat after the US threatened to ban e-cigarettes from the market, until the US Food and Drug administration has done a more significant study.  There is also the not insignificant threat that the sector could face which could send the sectors earning potential up in smoke. Given this uncertain outlook, having to find a new CEO would appear to be the least of its problems.

Having warned on profits in June today’s first half update from Ted Baker is a massive disappointment to those who felt that the company’s problems were behind it. Another profits warning as management warned that on current trends the second half of the year is likely to underperform relative to last year, has seen the shares drop another 30% today. Since the beginning of 2018 the shares have fallen over 75%.

Group revenue for the first half of the year fell 0.7% to £303.8m, while the company posted a loss before tax of £23m.

Sales overall were disappointing with declines in the UK and Europe of 3.9%, while the rest of the world was down 15.2%. the only bright spot was in the US which saw a rise of 3.1%. The deals to accelerate growth in Asia  appear to have incurred costs of £11.8m along with another £6.6m in respect of other exceptional costs, but even without these items the loss was still £2.7m.

In a slightly more positive update Swedish retailer H&M reported numbers that, after a two year slump, showed a return to growth.  Pre-tax profits rose by 25% to $500m which was above market expectations.

On the sales side, these have been rising  for the past six quarters with some concerns that this was happening as a result of aggressive discounting in an attempt to drive down inventory levels. It appears on the face of it, that the company is striking the right balance in regards to pricing in this regard, while a weaker Swedish krona isn’t hurting it either. Investors appear to like the numbers with the shares higher on the day, with the short sellers having further reason to feel squeezed given the over 40% gains in the share price already seen this year.

Transport group Stagecoach also provided a trading update this morning, saying that trading was in line with expectations for the year. A strong performance in the UK bus division saw revenue growth of 1% for the 20 weeks to September 2019, which was weaker than the same period in 2018. Management also cited their determination to pursue the claims against the UK government regarding the decision to disqualify them from bidding for three rail franchises.

The pound has remained a touch on the soft side in the wake of the announcement of the UK governments outline of what it wants from a Brexit deal. There is widespread scepticism that the EU will countenance a number of the proposals, however they haven’t been dismissed out of hand, and some MPs, particularly on the Labour side have signalled that they may well vote for it if it comes to a vote in Parliament.

US markets look set to open slightly higher after yesterday’s fall with the main focus likely to be on its own September services data ahead of tomorrow’s September payrolls report.

On the earnings front we’ll be hearing from Pepsico, and its Q3 numbers. A year ago management were looking to future proof its business away from sugary drinks and into baked fruit and vegetables, with the purchase of Baked Foods as well as the $3.2bn purchase of Sodastream in an attempt to fend off Coca Cola as it attempts to become more environmentally conscious.

With governments cracking down on sugar and waste the idea of producing concentrates and carbonation packs is a natural progression. In the summer the company reported that these efforts appeared to be paying off, with the company seeing revenues rise 4.5% in Q2 to $16.5bn, led by its Frito-Lay North America division which sells Doritos and Cheetos. Expectations for Q3 are for EPS to come in at $1.50c a share.

Tesla shares are also likely to be in focus after the company announced another record quarter for deliveries, though they did fall short of the 100k forecast of CEO Elon Musk. The company delivered 97k cars in Q3, with the bulk of the orders coming in the Model 3, which accounted for over 79k deliveries. The company is still expected to fall short of its 400k annual target and this may see the shares open lower when US markets reopen later today.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.