European stocks will open higher Wednesday despite yesterday’s weak U.S. economic data as Asian investors increased exposure in risky assets such as stocks and commodities following the latest selloffs.
FTSE 100 Index futures are currently up 0.8 percent ahead of the open.
U.K employment is stuck in the mud
With weak economic data coming out of U.K., including higher than estimated headline inflation figures yesterday, not much is going in the right direction. Today, the U.K. jobless claims change in April is expected (08:30 GMT) to be unchanged compared to 0.7K in February as the economy is unable to create enough private sectors jobs. At the same time, U.K. ILO unemployment rate (three months average) in March is expected to be 7.8 percent, unchanged from February. Though the numbers today will not show a rosy picture they will not damage overall sentiment as we head toward the open.
HP’s downward revision is a company-specific event
The technology behemoth HP lowered its full-year EPS forecast to USD 5.00 from previous of USD 5.20-5.28. The shares declined 7.3 percent in yesterday’s session and is down 12.3 percent year-to-date (see chart below).
Dell, one of HP’s competitors, reported earnings, excluding certain items, of USD 0.55, beating analysts’ estimates of USD 0.43 on higher corporate spending. The company’s more focused strategy on businesses is giving them an edge over HP that saw consumer PC sales plunge 23 percent last quarter. Dell’s shares were up 5.8 percent in extended trading. This is truly a turning point for Dell and a big victory for its founder Michael Dell that took back the role as CEO to get the company back on track after several years of relatively underperformance compared to its competitors.
Source: Bloomberg
The underlying and interesting point about HP’s performance lies in the success of Apple’s iPad which is beginning to cannibalise PC sales on a massive scale. According to Jefferies & Co., sales of iPads will balloon to around 246 million units in three years. It only took Apple three years to change the game in the mobile industry, wounding the largest player, Nokia, to a degree no one would have thought possible five years ago. Are they doing the same in the PC industry?