• Credit Suisse raise capital • Home Retail and Pearson shares dip double digits • Yahoo miss on earnings • US stocks to open higher A slump in China stocks and commodities has weighed on sentiment in European markets which has already been dampened this week on pared back hope of further stimulus from the European Central Bank. Another day another disappointing set of bank earnings. Credit Suisse shares dropped over 5% after the Swiss bank announced it will raise capital after missing profit expectations. There’s a sense that the big banks are perhaps cutting a bit too hard and fast. At the same time, it seems most of the banks are refocusing on Wealth Management but only a handful can come out on top of the same strategy. There wasn’t much sympathy for the devil on the FTSE 100. Investors punished Home Retail Group and Pearson after both the retailer and publisher warned on annual profits, sending shares down well into double digit losses. The weakness in Chinese stocks hit prominent mining companies including Anglo American which dropped over 3%. Home Retail Group shares dropped to 130p after the retailer issued a profit warning owed to concerns over Christmas sales. It’s fairly unprecedented for a retailer to warn on profits before the holiday season which can make or break a year. Even if the first half saw weaker profits with Argos falling prey to online competition, customers could still come out spending in droves over Christmas. The extent of the sell-off is not just a reaction to the profit warning but the timing of it. The profit warning demonstrates a clear lack of confidence in the strategy for Argos and Homebase over ‘Black Friday’. The bounce in Pearson’s share price following the sale of the Financial Times has now been completely obliterated. The company has warned on profits from its traditional publishing arm due to lost textbook orders in the United States. Having dived over 16%, Pearson shares now sit at 18 month lows. Top gainers on the UK’s benchmark were ARM holdings after reporting revenue gains, Sky for a strong profit performance and Merlin Entertainments after striking a deal for Legoland China. Excitement over the Ferrari IPO is helping US stocks nudge towards a positive open on Wednesday despite a poorly received earnings update from Yahoo! Yahoo! shares are expected to open lower after the online search and advertising company missed quarterly profit expectations. So far earnings at America’s top 500 companies have mostly exceeded estimates but revenues are falling short because of weak growth and a strong dollar. Earnings are expected from Coca-Cola, Boeing and General Motors before the opening bell while eBay and American Express report after the close. USA pre-opening levels S&P 500: 1 point higher at 2,031 Dow Jones: 12 points higher at 17,229 Nasdaq 100: 2 points higher at 4,440 CMC Markets is an execution only 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.
UK mid-morning market report – Bah Humbug! at Home Retail Group
11:15, 21 October 2015