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Walmart/Sainsbury's Merger Blocked - EMEA Brief 25 April

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MichaelaIG

  • UK Competition and Markets Authority have formally blocked the proposed £7.3 billion takeover of Asda by Sainsbury's causing the merger to collapse. 
  • Corporate earnings reports see European stocks set to open slightly higher. The FTSE 100 rising 9 points to 4780. Whereas Wall Street ended Wednesday's session lower following mixed US corporate results. 
  • Despite beating analysts expectations UBS reported a 27% fall in net profit for it's first quarter when compared to the same period the previous year. The net income reported came in at $1.1 billion compared to the $848 million expected. 
  • Tesla missed exceptions, reporting first quarter revenue of $4.54 billion ($0.65 billion below analysts suggestions).  The company cited "lower than expected delivery volumes" as one reason for missing the mark. 
  • US sanctions have denied Iran more than $10 billion in Oil revenue according to a US official. This contributing to Oil hovering near a 6 month high. Brent crude futures rising 6 cents to settle at $74.57 a barrel. 

Asian overnight: The BoJ has pledged to leave policy unchanged until 2020, as it tweaked its monetary stimulus efforts due to concerns about low inflation and a slowdown in growth. Meanwhile, South Korea saw its GDP fall 0.3% in the quarter, hurt by weaker growth in China, trade wars and a slower performance from the tech sector. Asian markets were under some pressure, although fresh records for the Nasdaq on Wall Street continued to bolster bullish sentiment.

UK, US and Europe: The UK's competition regulator has blocked the Sainsbury's/Asda merger, meaning UK supermarket shares will be in focus today. In addition, we have earnings from Barclays, followed up by US durable goods orders and initial jobless claims. Amazon, Intel, Ford and American Airlines all publish their earnings in the US today.

South Africa:  While US index Futures point to a marginal rebound this morning, most Asian equity markets trade lower with a tech sector led decline. The Bank of Japan has kept lending rates unchanged and has told markets that it intends to keep rates accommodative until at least 2020. Precious metals trade modestly higher this morning, while base metals trade mostly higher as well, led by gains in copper. The rand has firmed slightly, although remains at its lowest levels of the last few weeks. Tencent Holdings is down 1.75% in Asia, suggestive of a similar start for major holding company Naspers.

Economic calendar - key events and forecast (times in GMT)

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1.30pm – US durable goods orders (March): expected to rise 0.4% overall MoM, and 0.2% MoM excluding transportation orders. Markets to watch: US indices, USD crosses

Source: Daily FX Economic Calendar

 

Corporate News, Upgrades and Downgrades

  •  Sainsbury’s said that it had agreed with Asda to abandon its proposed merger, after the CMA said that prices would increase in the wake of the tie-up. 
  • Barclays saw pre-tax profit fall to £1.5 billion for the first quarter, from £1.7 billion a year earlier. The corporate and investment bank saw income fall 11%, while the tier one capital ratio fell from 13.2% to 13%. 
  • RBS siad that CEO Ross McEwan had resigned, although he will remain in place until a successor is found. 
  • Taylor Wimpey has made a good start to the year, although it has seen an increase in build cost pressures. Average private sales for the year so far were 1.03 per outlet per week, compared to 0.85 a year earlier. 

Adecco upgraded to outperform at MainFirst
Novartis upgraded to buy at Liberum
Nordic Semiconductor raised to neutral at SpareBank

Barratt cut to sell at Shore Capital
Taylor Wimpey cut to sell at Shore Capital
Julius Baer downgraded to neutral at Citi
Persimmon downgraded to hold at Shore Capital

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