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Retail sector profit warnings - EMEA brief 23rd July

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JamesIG

  • Fear of an increase in protectionism from the United States causes Asian equity markets to dip.
  • Profit warnings rise 29% quarter on quarter to 58 FTSE listed companies. Retail sector leads the way, and its expected the earnings shall continue due to uncertainty in the future.
  • Brexit secretary Raab says that the ‘no deal’ option is still on the table. GBP opened marginally down, but came back and has now gained from the Friday close.
  • G20 central bank leaders have warned that global economic growth risks have increased on the back of geopolitical tensions and trade war fears. Oil falls on the back of concerns on reduced fuel demand and a knock on to manufacturing. 
  • Thursdays ECB meeting is likely to be the primary event in the spotlight this week, however even then it’s likely to be a low key release. Current data suggests that things are performing as expected, so at best we’re likely to see Draghi express his satisfaction at his staffs predictions.

 

Asian overnight: Market jitters have continued into this week, with a strong selloff in the Nikkei 225 highlighting the strengthening Yen coming thanks to its role as a haven. The session was largely mixed, with gains in China and Hong Kong offsetting some of the losses from the Japanese and Australian regions. The weekend’s G20 meeting of finance ministers and central governors saw continued worries over the impact of current trade tensions on the global growth picture. 

UK, US and Europe: Looking ahead, a somewhat quiet start to the week on the economic calendar sees eyes turn to eurozone concerns, with the Bundesbank monthly report and consumer confidence from the eurozone. The US markets will be looking towards US existing home sales figure, following on last week’s disappointing building permits and housing starts figures. The earnings season ramps up, with today’s earnings from Alphabet representing the first heavy hitter to keep an eye out for.

South Africa: Global markets are trading mixed this morning, with US futures marginally lower, Australia and Japanese Indices trading firmly lower, while China and Hong Kong indices trade positive on the day. The Jse Top 40 Index is expected to trade marginally lower on open as it tempers strong gains from the end of last week. Miners in Australia are trading lower this morning with BHP Billiton down 1.4%, expectant of a similar start for locally listed resource counters today. Tencent Holdings is down 1.75% on the Hang Seng, suggestive of a similarly weak start for major holding company Naspers, which has a 20% weighting on the Top 40 Index. Today's economic calendar is relatively empty although markets will find guidance from earnings reports. South African banks are expected to release earnings updates in the week. 

Economic calendar - key events and forecast (times in BST)
1866855153_2018-07-2308_20_55-ForexEconomicCalendar.png.7b562ebdab8eea09dfce6ae20ceee0d9.png

1.30pm – US Chicago Fed nat’l activity index (June): forecast to rise to 0.4 from -0.15. Markets to watch: US indices, USD crosses

3pm – eurozone consumer confidence (July, flash): forecast to fall to -2.3 from -0.5. Market to watch: EUR crosses

3pm – US existing home sales (June): expected to rise 1.5% MoM from -0.4%. Markets to watch: US indices, USD crosses

Source: Daily FX Economic Calendar

Corporate News, Upgrades and Downgrades

  • The BBC, ITV and Channel 4 are looking to join forces to provide a shared streaming service with all content in one place. This comes as Ofcom recently reported a decline in people watching traditional broadcasts, as well as a decline in spending on original content, over on demand paid services such as Netflix.
  • Ryanair said that net profit fell to €319 million for Q1, although revenue was up 9% to €2.08 billion. Net margins dropped 6 percentage points to 15%. Lower fares, the lack of an Easter half, and higher oil and pilot costs all hit performance. Full-year guidance was left unchanged.
  • BHP Billiton said that it intended to defend a claim against the group in Australia relating to the Samarco dam failure. 
  • Hammerson has exchanged contracts for the sale of two retail parks for a total consideration of £164 million. The total sale price is at a 10% discount to the 2017 book value. 
  • Anglo American Platinum (SA) Interim results showed headline earnings per share of 1282c, a significant increase from the 285c achieved in the comparable interim period last year.
  • Harmony Gold (SA) has announced that it has exceeded annual FY18 production.

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