Good morning everyone,
The Bank of England’s Monetary Policy Committee (MPC) is expected to hold the UK base rate at 0.75% when it announces its vote later today. But a seed of doubt was planted at the last meeting when two MPC members voted for a cut.
Rates have been at 0.75% since August 2018, the first hike above 0.5% since the financial crisis. However, with uncertainty over Brexit and signs of a slowdown in the broader economy, some are calling for action now to bolster the economy.
The major news in the US saw the House of Representatives vote to impeach President Donald Trump, meaning that the process will now progress to a Senate trial. Following the historic vote, Trump becomes the third President to be impeached, but that is unlikely to result in his removal from office because of a second vote needed in the Republican-controlled Senate. As a result, markets have largely ignored proceedings so far.
Nowhere was this more evident than among the automakers as more M&A rocked the sector. After an announcement at the end of October about their intention to merge, Fiat Chrysler and Peugeot owner PSA have now put pen to paper on an all stock megadeal. The combination of the two firms will create the world’s fourth largest automaker, with revenues of $189bn a year and more annual vehicle sales than General Motors. No cash will change hands in the 50-50 merger, which will see shareholders in both firms receive stock in the combined company. Consolidation has been a constant feature of the auto industry, as firms look to gain the scale needed to make huge investments in technologies such as electric vehicles.
US stocks had a mixed day on Wednesday, with the S&P 500 and Dow Jones Industrial Average down a fraction, while the Nasdaq Composite rose 0.05%. The biggest loser in the S&P 500 on Wednesday was delivery giant FedEx, after it reported a disappointing set of earnings and a profit warning post-market close on Tuesday. FedEx shares closed down 10%, meaning that they are now trading more than 25% lower than the firm’s 2019 peak in April.
S&P 500: -0.04% Wednesday, +27.3% YTD
Dow Jones Industrial Average: -0.1% Wednesday, +21.06% YTD
Nasdaq Composite: +0.05% Wednesday, +33.04% YTD
Quiet day ahead of interest rate decision
It was a quiet day in UK markets yesterday, ahead of today’s decision on interest rates from the Bank of England’s Monetary Policy Committee. On Wednesday, the FTSE 100 climbed by 0.21%, and the FTSE 250 fell by 0.12%. Hikma Pharmaceuticals, industrial equipment rental firm Ashtead and tobacco giant Imperial Brands led the index, with their share prices closing 4.1%, 2.5% and 2.4% higher respectively. In the FTSE 250, engineering firm Senior Plc led the way, climbing by 7.3%. The company is a supplier to Boeing, and its shares had fallen heavily earlier in the week after the plane maker announced the suspension of production of its 737 Max jet.
FTSE 100: +0.21% Wednesday, +12.08% YTD
FTSE 250: -0.12% Wednesday, +23.77% YTD
Stocks to watch
Nike: Nike’s share price has run ahead of the broader US market this year, pushing the firm to a $125bn market cap. The sportswear giant reports earnings on Thursday. Investors will be watching for information on the impact of US-China trade tariffs, and how it’s new direct to consumer strategy – which saw it stop selling products on Amazon – is playing out. Last quarter, the company beat earnings expectations, but expectations for the latest quarter have been falling over the past few months. Currently, 22 analysts rate the stock as a buy or overweight, seven as a hold, and one as a sell, with 12-month price targets ranging from $82.50 to $150. The average is $105.98, versus the firm’s $100.57 close price on Wednesday.
Accenture: Consulting giant Accenture has had a big year, with its share price climbing by 46% in 2019 so far. The firm’s price-to-earnings ratio sits at 28, according to Zacks Equity Research, versus 19 for the broader consulting services industry. Wall Street analysts are expecting an earnings-per-share figure of $2 when the firm reports the results of its latest quarter on Thursday, versus the $1.96 it posted in the same quarter last year. The average 12-month analyst price targets sit in a narrow range: $180 from the most pessimistic analyst to $228 from the most bullish. The Wednesday closing price was $205.76.
Darden Restaurants: You’ve probably not heard of Darden, but you may be more familiar with the most famous of its eight restaurant brands: Olive Garden. The $14bn market cap company has more than 1,700 restaurants across North America. Olive Garden makes up over half the firm’s revenue, and has undergone a well-publicized overhaul over the past few years following scathing criticism from an activist investor. Over five years, Darden’s share price has climbed more than 120%, but it has lagged the S&P 500 this year. Analysts are expecting a 16% jump in the earnings per share figure when the firm reports its quarterly results on Thursday, versus the same quarter last year.
Cryptoassets enjoyed a marginal rebound overnight as investors moved in to snap up potential bargains in the heavily sold-off sector.
Bitcoin climbed back above $7,000 to trade at $7,103, whilst Ethereum and XRP also climbed off lows to trade at $126 and $0.185 respectively.
AMF approves France’s first ICO
The offering is from a company called ‘French-ICO’ and is the first to be white listed, a notice is posted on the Autorité des Marchés Financiers (AMF) website. The approval remains valid until June,1 2020.
Blockchain of Things Pays SEC $250,000 to Settle Unregistered ICO
Blockchain of Things Inc. (BCOT) has settled with the SEC for launching an ICO without first registering. They will also have to refund investors who request their funds back. BCOT will now register its tokens and file regular reports with the regulator. This is the latest in a swathe of penalties for unregistered ICOs.
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