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Euro market news

London open: Stocks rise ahead of Brexit vote; Royal Mail fails to deliver

London stocks rose at the open on Tuesday, recovering from losses in the previous session as investors eyed the second parliamentary vote on Theresa May’s Brexit ‘Plan B’ and continued to keep an eye on US-China trade relations.

At 0830 GMT, the FTSE 100 was up 0.5% at 6,779.10, while the pound was down 0.1% against the dollar at 1.3149 and 0.2% lower versus the euro at 1.1489 ahead of the Commons vote.

Lukman Otunuga, research analyst at FXTM, said it remains unclear how the second parliamentary vote will play out, especially considering how ‘Plan B’ shares many similarities with ‘Plan A’ which was previously rejected by British MPs.

“Although the pending vote is not legally binding, it should provide fresh insight into what the House of Commons desires regarding Brexit. While there are more than a dozen amendments suggested, sterling is seen appreciating if the speaker chooses the Cooper and Brady amendments.

“Although expectations continue to mount over the government extending Article 50, it is worth noting that the unanimous agreement of all the remaining 27 EU countries will be needed for this to materialise. The truth of the matter remains that one must always expect the unexpected when dealing with Brexit, and the parliamentary Brexit vote this evening should be no exception.”

Meanwhile, market participants were also be looking ahead to the two days of Sino-US trade talks that kick off in Washington on Wednesday, after the US Justice Department filed a host of criminal charges against Chinese telecoms company Huawei and its chief financial officer, Meng Wanzhou.

The US delegation will be led by Trade Representative Robert Lighthizer and will include Treasury Secretary Steven Mnuchin, Secretary of Commerce Wilbur Ross, President Trump’s policy advisers Larry Kudlow and Peter Navarro. The Chinese delegation will be led by Vice Premier Liu He.

On the corporate front, British American Tobacco was the standout gainer on the FTSE 100 after an upgrade to ‘overweight’ at Piper Jaffray, while Imperial Brands followed close behind.

Housebuilder Crest Nicholson edged higher despite posting a 15% drop in full-year profit amid Brexit uncertainty and said it expects a “difficult” first half of 2019, but with revenues and volumes both higher.

Intermediate Capital Group rallied after a well-received third-quarter update, while UDG Healthcare and Greencore advanced following the release of their first-quarter statements.

Royal Mail tumbled, however, as it warned “business uncertainty” is hitting letter volumes despite a busy Christmas period for parcels. The letters and parcels group now expects to deliver adjusted group operating profit before transformation costs of £500-530m, from the £500-550m previously indicated.

Pensions and investment platform Hargreaves Lansdown was also in the red as it reported a 24% drop in net new business for the first half and a 6% decline in assets under administration.

BHP ticked a touch lower as it said no agreement had been reached over the financial obligations of its Samarco joint venture following the 2015 mine disaster that killed 19 people.

Domino’s Pizza lost ground as it said full-year underlying pre-tax profit was expected to be at the lower end of the consensus range of £93.9m to £98.2m, while PZ Cussons tanked after saying that adjusted pre-tax profit for the year will be towards £70m, down from £80.1m the year before.

In broker note action, Electrocomponents was upgraded to ‘buy’ at BerenbergDiploma was downgraded to ‘hold’ at Berenberg, along with Halma, while Polymetal was cut to ‘hold’ at VTB Capital.

US close: Markets in the red as Caterpillar, chipmakers sink

US stocks finished well into the red on Monday, as investors eyed this week’s trade talks between the US and China and a slew of earnings releases – including a major earnings miss by one of the Dow’s major blue chip outfits and one of Wall Street’s tech darlings.

The Dow Jones Industrial Average ended the session down 0.84% at 24,528.22, the S&P 500 was off 0.78% at 2,643.85, and the Nasdaq 100 was 1.33% lower at 6,697.09.

The Dow Jones Industrial Average ended the session down 0.84% at 24,528.22, the S&P 500 was off 0.78% at 2,643.85, and the Nasdaq 100 was 1.33% lower at 6,697.09.

US stocks were heading south from the opening bell earlier, after the President warned that another government shutdown could be on the horizon, just days after the nation’s longest had drawn to a close.

There was also a massive earnings miss by Caterpillar, which took a significant chunk out of the Dow.

Blaming “lower demand” in China, the maker of construction and mining equipment said that sales in Asia/Pacific fell during the quarter.

“With so much to focus on this week, it could get quite volatile in the markets,” said Oandaanalyst Craig Erlam earlier.

“Wednesday’s Fed decision may be the least impactful of the lot, with the central bank having indicated that it’s going to take a more patient approach to tightening and with no fresh projections due until March, it may just sit this one out.”

Erlam explained that, while the jobs report on Friday would still attract attention, the numbers were “highly likely” to be skewed by the shutdown so would be taken with a pinch of salt.

“That leaves the two big events this week, the vote in UK parliament on Theresa May’s plan B – and the amendments to it that are put forward – and the high-level trade talks in Washington, with Vice Premier Liu He leading a delegation.”

Although the temporary government shutdown came to an end on Friday, investors were seemingly still on edge after Trump told the Wall Street Journal over the weekend that another shutdown was “certainly an option”.

Meanwhile, Sino-US relations were also in focus as Vice-Premier Liu was set to meet US Trade Representative Robert Lighthizer in Washington on Wednesday for two days of talks.

On the data front, the Dallas Fed manufacturing business index for January showed that broader business conditions in the area had bounced back from lows in December.

The general business activity index rebounded from a multiyear low of -5.1 in December to 1.0 in January, according to the Federal Reserve Bank of Dallas.

The near-zero reading seemed to suggest that manufacturers in the Dallas region were fairly balanced in their assessment of whether activity had improved or worsened from last month.

In corporate news, Caterpillar shares tanked 9.13%, after it reported a big earnings miss before the bell.

The company’s guidance for the next quarter also fell short of analysts’ estimates.

Shares in technology company Nvidia were also lower, erasing 13/82% as it cut its revenue guidance due to “deteriorating macroeconomic conditions”, mostly in China.

In an update for the fourth quarter of fiscal 2019, the group said it now expects revenue of $2.2bn, down from previous guidance of $2.70bn as consumer demand for its graphics processing units has taken a hit as a result of a “crypto hangover”.

Adding Nvidia’s poor performance to Apple‘s warning earlier in the month, fellow chipmakerAdvanced Micro Devices was also down 7.98% in early trade, while Intel and Texas Instruments were both weaker by 0.7% and 1.66%, respectively.

Investors were also holding their breath ahead of a report from tech giant Apple on Tuesday.

Russ Mould, investment director at AJ Bell, said investors will be looking for some reassurance after the profit warning earlier this month, with the important numbers not being those for the first quarter, but any guidance from boss Tim Cook about the second quarter and beyond.

“Using the midpoint of the revised guidance provided by Tim Cook on 3 January, Apple is expected to record an earnings per share figure of $4.16 for its fiscal first quarter,” he said.

“That still represents year-on-year growth of some 7%, despite the 10% downgrades implied by the trading alert, but all of that increase comes from a drop in the tax charge and a lower share count following the company’s massive share buyback scheme.”

Tuesday newspaper round-up: Oddbins, Brexit, Patisserie Valerie, Google

The owner of Oddbins has warned staff of job losses in the near future as the off-licence business said it had appointed advisers to look at options for the future after an “extremely tough” Christmas. In an email to staff at European Food Brokers group, which also includes Wine Cellar Trading and Whittalls Wine Merchants, directors said they had concluded that its retail businesses “cannot continue in their current form” and may have to be sold. – Guardian

Parliament is facing a day of further Brexit deadlock after Theresa May swung the government’s weight behind an amendment that would send her back to Brussels to demand an alternative to the Irish border backstop, splintering Conservative support. The chances of the amendment, championed by the senior backbencher Sir Graham Brady, are on a knife-edge after Tory Brexiters split over whether they should back the change, while pro-remain MPs suggested they would vote against. – Guardian

Patisserie Valerie sales were in secret decline for at least three years before the discovery of the accounting black hole that triggered its collapse, The Daily Telegraph can reveal. Documents containing the stricken cafe chain’s finances show revenues from “un-loved” established stores were falling even as the management team under executive chairman Luke Johnson pursued an “ambitious roll-out plan”. – Telegraph

Google has unveiled plans to offer anti-hacking technology called Project Shield to political organisations in Europe, amid fears of election tampering ahead of the European Union elections in May. Google’s experimental incubator Jigsaw has said it will offer free cyber protection to political parties and candidates from Tuesday after citing a “pressing concern” to defend elections from digital attacks. – Telegraph

Britain’s biggest accountancy firms are pushing to delay sweeping reforms to the industry, including a forced separation of their businesses, before parliamentary hearings this week. The heads of Deloitte, KPMG, EY and PWC have written to the Commons business committee to say the competition watchdog should postpone moves to overhaul the audit market until the completion of a separate review by Donald Brydon, chairman of the London Stock Exchange, which could take another 12 months. – The Times

Saudi Arabia has sharply cut back its exposure to the electric carmaker Tesla, only four months after Elon Musk settled fraud charges over his claims that the kingdom was backing a management buyout. The country’s Public Investment Fund hedged most of its 4.9 per cent stake in Tesla with the help of JP Morgan Chase after the market closed on January 17. – The Times.

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