Stock Market News Today 2018/08/05
Trade War News Today. Washington reports Mr Trump has decided to focus his firepower on China as he gears up for the critical elections in November. “What is popular going into the midterms on both sides of the aisle is China bashing,” says Dennis Wilder, a former top China adviser to George W Bush. Tom Mitchell in Beijing reveals President Xi Jinping is having his hardest time since assuming power, partly due to the trade war.
Apple News Today. Apple won the race to become the first company to reach a trillion-dollar market capitalisation, beating Microsoft, Amazon and Alphabet to the finish line.
Brexit News Today. One of the guilty pleasures for Parisians is the Marks and Spencer sandwich. But it will no longer be sent across the Channel if Brexit leads to complicated new border arrangements, the company’s chairman has warned.
China Stock Market News Today. China has lost its ranking as having the world’s number two stock market? After a Thursday slump, Chinese equities were worth $6.09tn, according to data compiled by Bloomberg. That compared with $6.17tn for Japan’s. Chinese equities and the nation’s currency have taken a beating this year amid a trade spat with the Trump administration.
US Jobs Report News Today. The US jobs report for July is expected to be positive, but what many observers will be looking at is wage growth. Are companies paying workers more because of the tight labour market? So far, not as much as past economic good times.
Theresa May News Today. A make-or-break visit for Brexit. That’s one of the ways Theresa May’s trip to see Emmanuel Macron at his Fort de Brégançon island retreat today has been described. While there are signs of a thaw from some parts of the EU, British diplomats fear Mr Macron still wants to drive a hard bargain with the UK, not least to try to attract financial services from London to Paris.
Stocks to watch. International Consolidated Airlines led the FTSE 100 fallers after second-quarter results from the British Airways owner came in slightly below expectations. Fuel costs and foreign exchange headwinds meant IAG posted a quarterly operating profit of €835m compared with a €848m consensus.
Mondi was the biggest gainer among the packaging makers after beating first-half earnings expectations and reporting a positive start to the second half. Sharp price rises for kraftliner and recycled containerboard meant Mondi’s interim operating earnings jumped 25 per cent to €630m.
“With further price increases in the process of being implemented, demand remaining solid and inflation pressures seemingly under control, this should result in further upgrades to forecasts as the year progresses,” said Davy.
Royal Bank of Scotland gained after confirming it was resuming dividends for the first time since its 2008 bailout, with the lender proposing a 2p a share interim and setting its regular payout ratio at 40 per cent of net income. RBS’s interim pre-tax profit beat consensus forecasts by 11 per cent as an unexpected decline in impairments offset higher operating costs.
RBS’s better than expected core tier one capital ratio of 16.1 per cent suggested scope for one-off buybacks and special dividends, said analysts. Macquarie estimated that a 14 per cent ratio would release more than £4bn of capital, or 33p a share, in addition to the regular payout of 12p.
Pets at Home rallied after it repeated full-year targets in a short trading update. The main positive was a fourth consecutive quarter of revenue growth, with like-for-like sales rising 6.1 per cent on a like-for-like basis.
“Whilst full-year forecasts remain unchanged, this raises questions around whether the earnings have troughed,” said Liberum, which took Pets at Home off its “sell” list. “Considering the price of 8.6 times earnings, we feel the risk/reward profile may have shifted.”
> Société Générale upgraded Rolls-Royce from “hold” to “buy” on the back of Thursday’s results, when the engine maker reiterated a target of £1bn in free cash flow by 2020 even after taking a £554m charge to cover long-running issues with its Trent 1000 model.
> HSBC upgraded Kaz Minerals from “reduce” to “hold” on valuation grounds. The Kazakhstan mining group registered its sharpest ever fall on Thursday after announcing a $900m deal to buy an undeveloped copper prospect in eastern Russia, which will require $5.5bn of investment to bring into production by the middle of next decade.
“We expect rotation of the shareholder base as the investment case realigns to growth from expectations of deleveraging and potential cash returns,” said HSBC.
HSBC put a 650p target on Kaz. It modelled an internal rate of return for the project of 12.4 per cent excluding the acquisition cost, compared with a cost of capital for Kaz of 11.6 per cent.
BMO, retaining an “outperform” rating on Kaz with a 750p target, said the acquisition was “modestly positive” on a net present value “depending upon as-yet unagreed Russian tax breaks”. It told clients: “What may be upsetting investors is positive free cashlow being kicked from 2020 to 2026 or beyond. Kaz’s counter-argument, which we believe has some validity, is there are few large copper projects available that can deliver into future scarcity.”
In brief: Segro rated new “outperform” at Credit Suisse; Permanent TSB raised to “outperform” at Davy; S & U Stores upgraded to “add” at Peel Hunt; AB InBev upgraded to “buy” at SocGen; HelloFresh and Takeaway raised to “overweight” at JPMorgan Cazenove; Metro upgraded to “hold” at HSBC; Proximus raised to “equal-weight” at Morgan Stanley; Elisa cut to “underweight” at Morgan Stanley; Saipem downgraded to “hold” at HSBC.