Monthly Archives: February 2018

MARKET UPDATE

At 2.30pm the FTSE 100 had rallied by a rather parsimonious 15 points at 7306. Share price dissemination appears to have been be somewhat uninteresting, though there were plenty of corporate results and some sparkling M&A activity. Banks were dull as were mining stocks, with Rio (+1.25%) expressing some upbeat interest with Glencore (-0.5%) taking a rest after some frenetic activity in recent months.

The written news on the SKY/Comcast/21st Century/Walt Disney deal should solve the unemployment problem in the paper-pulp industry.  Shares are now up 21% – 93p above Comcast’s bid.  So, either Walt Disney steps up or Comcast will eventually win the battle. Persimmon posted great results with some money going back to shareholders – shares up 8%, having been up 10% early doors. Provident Financial’s shareholders dined out on a smaller amount of money being required from shareholders than expected – £300m rather than £500m – shares up 76%, but only a recovery from the debacle a year ago. They were £29 a year ago. Standard Chartered increased its profit for the year from £409m to £2.4bn. Shares were up 2.9% initially but the earnings are indifferent – so shares were down 0.5%. Direct Line’s effort was not inspirational – -1%. Inchcape was down 2%, Drax was up 2.5% and GKN was unchanged.  This story is all about whether Melrose will be successful or not. On most days Virgin Money would have grabbed the ‘yellow jersey’ – up 6.5%, but its performance was blown away by Provident Financial.  After 40 minutes trading the DOW was up 41 points. We await Jay Powell’s testimony to Congress is due to start anytime soon.

David Buik

Communications

Mobile – 07788 144 877

 

Spread bets and CFDs are leveraged products, which means you could lose more than you deposit. You should ensure spread betting meets your investment objectives. View full risk warning

This email neither constitutes, nor is to be construed as an offer to buy or sell investments. The information and opinions expressed herein are based on sources we believe to be reliable but we do not represent that they are accurate or complete. No liability is accepted by Core Spreads for any direct or consequential loss arising from this email. Please carry out your own virus checks.

Core Spreads  is a trading name of Finsa Europe Ltd, a company registered in England and Wales under number 07073413, which is authorised and regulated by the Financial Conduct Authority under firm reference number 525164. Registered Office: Tower Bridge Business Centre, 46 – 48 East Smithfield, London, E1W 1AW, United Kingdom. www.corespreads.com is owned and operated by Finsa Europe Limited. © 2018 Core Spreads.

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WEEKLY FAYRE

WEEKLY FAYRE – Monday 26th February 2018

 

“Men of England, wherefore plough
For the lords who lay ye low?
Wherefore weave with toil and care
The rich robes your tyrants wear?

Wherefore feed and clothe and save,
From the cradle to the grave,
Those ungrateful drones who would
Drain your sweat — nay, drink your blood?

Wherefore, Bees of England, forge
Many a weapon, chain, and scourge,
That these stingless drones may spoil
The forced produce of your toil?

Have ye leisure, comfort, calm,
Shelter, food, love’s gentle balm?
Or what is it ye buy so dear
With your pain and with your fear?

The seed ye sow another reaps;
The wealth ye find another keeps;
The robes ye weave another wears;
The arms ye forge another bears.

Sow seed, — but let no tyrant reap;
Find wealth, — let no imposter heap;
Weave robes, — let not the idle wear;
Forge arms, in your defence to bear.

Shrink to your cellars, holes, and cells;
In halls ye deck another dwells.
Why shake the chains ye wrought? Ye see
The steel ye tempered glance on ye.

With plough and spade and hoe and loom,
Trace your grave, and build your tomb,
And weave your winding-sheet, till fair
England be your sepulchre!”

 

Percy Bysshe Shelley – poet – 1792-1822

 

 

    Everyone, regardless of their passion and political persuasion are heartily sick to death with BREXIT and I am certainly not going to expound on my views on the subject, which are already well-chronicled. Perhaps the Government doesn’t deserve an easy ride for their handling of a very sensitive and tricky set of negotiations.  However, suffice to say that the constant negative briefing against the UK, without knowing what is being offered or suggested, by the likes of Tusk, Varadkar, Barnier, Juncker and his bag carrier Martin Selmayr will not help bring these deliberations to a satisfactory conclusion. They will all have earned a first-class honours degree on how to get as many backs up of the UK electorate as possible! PM May is also likely to meet with considerable resistance in getting what many MPs perceive to be disagreeable legislation through the lobbies. So, eyes down for a full house with the Government’s presentation of its proposed plans to the EU on Friday and the European Council’s response next week.

 

   The rugby on offer over the weekend was high quality with Ireland worthy winners at the Allianz against a spirited Welsh side, which just refused to lie down. The score line of 37-27 illustrates the open nature of the game.  The same cannot be said of Scotland’s well-deserved Calcutta Cup win against England at Murrayfield.  Scotland were superior in every department.  England failed to record any turnover ball of note throughout the match. I cannot remember this happening in recent years.  Scotland were never in danger throughout the game and England only woke up in the last 10 minutes, when it was too late!

 

INDEX 16/2/18 23/2/18 % gain/loss
FTSE 100 7294 7244 -0.68%
XETRA-DAX 12495 12438 -0.45%
CAC40 5295 5317 +0.41%
DJIA 25165 25309 +0.57%
S&P 500 2727 2747 +0.73%
NASDAQ 7236 7337 +1.39%
Hang Seng 30958 31267 +0.99%
Nikkei225 21903 21892 -0.05%
Shanghai Composite 3128 3289 +05.14%

 

 

If observers look at the table above, it is hardly reflective on what went on in global stock markets last week. Chinese markets were closed for much of the week; hence Shanghai was playing catch up on Thursday.  On the Street of Dreams volatility was there in spades and sentiment for the early part of the week remained very weak, though a strong rally was evident on Friday. With 10-year US Treasury yields hitting their highest level of 2.95% since 2009, driven up by fears of inflation and wage inflation, traders and observers could see the case for higher interest rates, which had already been guided by the FED.  Coupled with the economy appearing to remain robust, investors were encouraged to take some risk off the table.  There remains a ‘school of thought’ in the US, which believes equities might have peaked out.  Walmart, one of the US’s main bellwether stocks, despite increased revenues to $136 billion, saw its share price plunge by a gargantuan 10% on Tuesday, thanks in the main to earnings missing analysts’ expectations for the holiday period, as e-commerce growth slowing to 23 percent. That is a fall in share value of over $25 billion! There was a decent bounce in NASDAQ stocks for most of the main constituent stocks, despite Kylie Jenner, a well-known celebrity, whom I have never heard of, telling her followers that she no longer uses Snap Chat, causing the shares to fall by 15% on the week amounting to over $2 billion in value.  After two months of the year, the deal flow seems to be quite slow in the US.  However General Mills did serve notice to buy pet food giant Blue Buffalo in an $8 billion deal. 

 

Here in Old Blighty the FTSE 100 for much of the week was rudderless looking for guidance from across the pond. Wage inflation increased from 2.3% to 2.5, with unemployment increasing a smidgen for the first time in almost a decade. BOE Sir Dave Ramsden joins the bears in looking for a hike in rates this coming May. Also, UK GDP estimate was lowered a pip to 0.4% on an annualised basis to 1.7%. The week was dominated by banking results, starting with HSBC on Tuesday. Investors said goodbye to Stuart Gulliver and Hello to John Flint as CEO.  They were underwhelmed by the numbers, despite being a great improvement on last year’s effort. However, margins were seen to be eroded and on the week its shares fell by all but 5% to 723p. HSBC now executes 75% of its business in Asia. Lloyds Banking Group posted a 24% increase in profits for the year on Tuesday to £5.3 billion. The dividend of 3.05p per share was also well received, but there was ANOTHER £1 billion provision for PPI! Lloyds shares were up 0.5p on the week to 68.65p. The question everyone is asking is will Antonio Horta-Osorio stay after 7 years in the plate?  Despite its litigation problems Barclays attracted attention as a recovery operation on Wednesday and its shares were up 4% on the week to 209.8p.  Finally, RBS on Friday posted its first profit for 10 years of £752 million. However, this bank, though trading satisfactorily with an operating profit of over £2 billion, is still attracting adverse publicity with its GRG division, which will cost the bank money, as will the DOJ’s fine, yet to be announced for mortgage securities manipulation. It could cost RBS as much as $5 billion. Once this fine is finalised, RBS can consider paying a dividend. RBS’s share price was down 4.5% on the week to 268p, way below the 503p breakeven for the taxpayer.

 

AA’s share price fell by 25% on a profits warning and Moneysupermarket’s fell by 17% for similar reasons. William Hill’s effort was not helped by a fine of £6.2 million being imposed for a money-laundering associated offence, though the shares were up 3% on the week on an improved outlook. BAE Systems and IAG slightly disappointed with their numbers. The GKN saga bats on with Melrose still in the frame as a predator, but the level of enthusiasm appears to be waning for this deal to be consummated. Persimmon reports next week.  CEO Jeff Fairbairn has agreed to cut his long-term bonus of £110 million by £30 million – how magnanimous is that?  Also, Serco’s Rupert Soames will take a 20% pay cut (last Year £2.2 million) as the company’s share price has fallen by almost two thirds. Some major shareholders in Unilever have warned that it may not be in the company’s best interest to have its Head Office in Rotterdam only. The spat between the Sunday Times and Sir Philip Green over whether there have been early talks about selling Arcadia or just Top Shop and Topman to a potential Chines buyer, Shandong Rui, has gathered momentum.  Sir Philip vehemently denies there has been any conversations neither direct and nor does it appear that HSBC or Goldman have been involved as an advisor or as an intermediary on the subject. Any sale of Arcadia or part of that emporium is likely to incur a pension payment, which is rumoured to be about £500m.

 

UK companies posting results this week – Monday – AB Foods, Hammerson, Senior, Bunzl, One Media, Hiscox, Keller, Dechra Pharmaceuticals – Tuesday – Croda, Direct Line, Drax, Fresnillio, GKN, , Meggitt, Virgin money, Standard Chartered Bank, Provident Financial, Persimmon, James Fisher, Inchcape, Wednesday – Admiral, Foxtons, Go-Compare, , Informa, ITV, , Man Group, Taylor Wimpey, Travis Perkins, St James’s Place, Jardine Lloyd Thompson, UBM, Genus, Weir Group, Thursday – Capita, Cobham, CRH, Hastings, Howden Joinery, Merlin Entertainment, Bovis Homes, RPS Group, Evraz, National Express, Petrofac, Rentokil, Schroders, Vesuvius, WPP, Friday – London Stock Exchange, Spire Healthcare, Essentra, Mondi

 

 

US companies posting results this week – Monday – Dean Foods, Tuesday – Toll Brothers, Autozone, Macy’s, Hertz, Wednesday – Chico’s FAS, Worldpay, Office Depot, L-Brands, Thursday – Kohl’s, Sotheby’s, Liberty Media, Best Buy, American Outdoor Brands, Friday – JC Penney, Revlon, Foot Locker

 

Economic data posted this week – Wednesday – US GDP, Thursday – UK PMI Manufacturing, Friday – UK PMI Construction

 

David Buik

Communications

Mobile – 07788 144 877

 

Spread bets and CFDs are leveraged products, which means you could lose more than you deposit. You should ensure spread betting meets your investment objectives. View full risk warning

This email neither constitutes, nor is to be construed as an offer to buy or sell investments. The information and opinions expressed herein are based on sources we believe to be reliable but we do not represent that they are accurate or complete. No liability is accepted by Core Spreads for any direct or consequential loss arising from this email. Please carry out your own virus checks.

Core Spreads  is a trading name of Finsa Europe Ltd, a company registered in England and Wales under number 07073413, which is authorised and regulated by the Financial Conduct Authority under firm reference number 525164. Registered Office: Tower Bridge Business Centre, 46 – 48 East Smithfield, London, E1W 1AW, United Kingdom. www.corespreads.com is owned and operated by Finsa Europe Limited. © 2018 Core Spreads.

HSBC – VALEDICTORY SET OF NUMBERS FOR STUART GULLIVER – RETURN ON CAPITAL A LITTLE LIGHT

After 38 years of unbroken service to HSBC, Stuart Gulliver is finally handing over the reins as CEO to John Flint after 7 turbulent years in the saddle, having taken over from Michael Geoghegan. Most of Mr Gulliver’s dynasty has been concentrated on downsizing the business to about 100 businesses in 18 countries, having lightened up their staff requirements by 25,000 over the past 5 years. Mr Gulliver’s legacy has been marginally dogged by controversy, such as money laundering which incurred a huge fine and tax issues with its subsidiary in Switzerland, not forgetting a few small foreign exchange misdemeanours.  However, buoyed by a final annual increment of £6.09 million following in the wake of £5.675m paid to him last year, I suspect he will get over the disappointment quite quickly.

 

HSBC posted annual results this morning – a profit of $17.2 billion on revenues of $50.5 billion (+5% on last year).  The 4th quarter profit appeared slightly light at $3.6 billion, when $4.06 billion was the expected number.  There was, however, a $188 million increase on the loan impairment charges to $685 million (40%), most of it down to Steinhoff and Carillion, which would have damaged the bottom line. Tier One Capital was strong at 14.5%. The importance of Asia to HSBC increases yearly – now 75% of its business emanates from that region.  The US has diminished in importance as has the UK, despite retail banking’s new head office in Birmingham. HSBC has already expressed its intention of moving 20% of its investment banking business to Paris which will involve about 1000 employees.  The cost is expected to approach £1 billion.
investment banking numbers were disappointing falling by 7.5% in the quarter. This was caused by a 24 per cent drop in fixed income, currency and commodity trading revenues, in line with many big rivals.

 

HSBC’S return on equity for 2017/8 was 5.9 per cent, below its own target of 10%, falling behind its US rivals, such as JPMorgan Chase. There were no new share buy-back recommendations. Since Jan 200o HSBC’s share price has been volatile. However, apart from dividends and buybacks has not been a great performer – 800p to 734p (-3.4% on the day so far. However, since the banking crisis the share price has doubled from 360p to 734p, as I write.

 

HSBC has a new broom in terms of management – Mark Tucker chairman replacing Douglas Flint, John Flint CEO replacing Stuart Gulliver and Iain Mackay Finance Director – let’s see how it goes! 

David Buik

Communications

Mobile – 07788 144 877

 

Spread bets and CFDs are leveraged products, which means you could lose more than you deposit. You should ensure spread betting meets your investment objectives. View full risk warning

This email neither constitutes, nor is to be construed as an offer to buy or sell investments. The information and opinions expressed herein are based on sources we believe to be reliable but we do not represent that they are accurate or complete. No liability is accepted by Core Spreads for any direct or consequential loss arising from this email. Please carry out your own virus checks.

Core Spreads  is a trading name of Finsa Europe Ltd, a company registered in England and Wales under number 07073413, which is authorised and regulated by the Financial Conduct Authority under firm reference number 525164. Registered Office: Tower Bridge Business Centre, 46 – 48 East Smithfield, London, E1W 1AW, United Kingdom. www.corespreads.com is owned and operated by Finsa Europe Limited. © 2018 Core Spreads.

WEEKLY FAYRE

WEEKLY FAYRE – Monday 19th February 2018

 

A thing of beauty is a joy for ever: 
Its loveliness increases; it will never
Pass into nothingness; but still will keep
A bower quiet for us, and a sleep
Full of sweet dreams, and health, and quiet breathing.
Therefore, on every morrow, are we wreathing
A flowery band to bind us to the earth,
Spite of despondence, of the inhuman dearth
Of noble natures, of the gloomy days,
Of all the unhealthy and o’er-darkn’d ways
Made for our searching: yes, in spite of all,
Some shape of beauty moves away the pall
From our dark spirits. Such the sun, the moon,
Trees old and young, sprouting a shady boon
For simple sheep; and such are daffodils
With the green world they live in; and clear rills
That for themselves a cooling covert make
‘Gainst the hot season; the mid-forest brake,
Rich with a sprinkling of fair musk-rose blooms:
And such too is the grandeur of the dooms
We have imagined for the mighty dead.”

  

John Keats – poet – 1795-1821

 

I imagine there wasn’t a dry eye at Ascot last Saturday, as ‘Waiting Patiently’, who won the Ascot Cup, seeing ‘Cue Card’ off with not that much to spare, as he was led into the winners’ enclosure by the connections of his trainer, Malcolm Jefferson, who recently gave up the unequal struggles in battling for his life against cancer. The Norton handler had only been buried the day before. Unless the ground comes up ‘bottomless’, I doubt he will run at Cheltenham in the Gold Cup or the Ryanair.  If it chucks it down, it would be a brave person to not give this gelding some serious consideration.

 

Though many of the ladies were clad in black with a strong political message, the BAFTA awards was a glittering occasion with Gary Oldman justifiably winning best actor for ‘Darkest Hour’ with ‘Three Billboards..’ winning a fair few major awards including best film and Frances McDormand indisputably best actress. I could not understand why ‘Shape of Water’ starring Sally Hawkins did so well – such a weird subject! It was not for me!

 

 

    In the US, the bank sector tends to post its numbers at the start of each earning season, whereas here in the UK it is towards the end of the cycle. In the case of European banks there is no set pattern. US banks posted better than expected numbers apart from revenue from investment banking, with Morgan Stanley proving to be the exception.  Trading disappointed, due to a lack of volatility, low interest rates, the threat of a bond bubble bursting and concern 0ver rising interest rates.  Well, volatility certainly returned with a vengeance in January. European banks have performed indifferently. Away from the US it has been a very bad month for banks.  Deutsche and Credit Suisse are still under-water and UBS is not exactly firing on all cylinders.  Societe Generale’s share price is near enough where it was a month ago and BNP Paribas’s is slightly lower. Also, there is a strong school of thought that believes the European banking system is not as robust as it should be. In fact, if the EU negotiations go to ‘hell and a handcart’ many acolytes are of the opinion, that EU banks, away from those working out of London, may find that their balance sheets are not strong enough to step in to the breach and pick up the cudgel from London.

 

   The UK’s banking sector posts its results this week.  Apart from the headline numbers, which could read well, there will be a few metaphorical cans of worms to deal with.  Significant write downs of maybe £1.25 billion may be recorded associated with the collapse of Carillion.  RBS has had shocking press over its handling of SMES at the time of the banking crisis and the FSA has come under attack for its perceived poor handling and lack of protection of these clients.  It also waits its fine from the US, which could be as much as $6 billion. Lloyds Banking will be watched carefully for its dividend policy – will it be increased from 3p a share to 4.5p. Will Barclays’ US investment banking operation have been less profitable than the year before as others have been? HSBC sets the ball rolling on Tuesday. Stuart Gulliver will be retiring as CEO and John Flint will replace him.  70% of its business emanates from Asia.  How is HSBC’S UK operation doing?  Will Paris have a major presence in the future? It strikes me that, since US banks have got their act together more quickly, in terms of recovery and regulation post the financial crisis, the door for competing for business has been slammed on others, leaving US banks in an unassailable position. Their power seems to have been enhanced by problems at Deutsche and UBS in recent years. A decade has passed since the banking crisis and the sector is nowhere near commanding the public respect.  Everyone was keen to blame casino banking! It paled in to insignificance in comparison to poor credit judgement and issues such as PPI which cost £30 billion.

 

 

INDEX 12/2/18 16/2/18 % gain/loss
FTSE 100 7092 7294 +2.8%
DAX 12120 12451 +2.7%
DJIA 24337 25219 +3.6%
S&P 500 2636 2732 +3.6%
NASDAQ 6936 7239 +4.4%
NIKKEI 21555 21720 +0.8%
HANG SENG 29679 31115 +4.8%

 

 

Was last week the lull before the storm, encapsulating more disruption and exacerbated volatility?  No one can be quite sure. Last year volatility played no role to speak of in financial markets.  Towards the end of the year we saw bond yields creep up slowly in response to the US’S forward guidance on a gradual increase in interest rates. The week was one of consolidation, as most global indices regained their poise (see table above), apart from Shanghai (-0.8%). So far 80% of S&P 500 companies have posted results – 75% have beaten profit expectations and 78% sales expectations. Last week there were good numbers from Cisco and decent efforts from Kraft Heinz, Metlife and Coca-Cola. So, the fundamentals are still in place, though in the US data on inflation caused a few furrowed brows and retail sales were flat. The weather has been austere and the internet sales rule OK – ask Amazon, Alibaba and Baidu. Oil rallied to $65+ a barrel as did gold $1350 an ounce.

 

This side of the ‘Pond’ there were some decent earnings – Airbus and Schneider Electric especially, though Nestle slightly disappointed. It was a relatively quiet week for large cap ‘earnings’ but the news flow was fast and furious. Despite strength of the Pound ($1.40.5 at the end of the week on inflationary concerns) the FTSE 100 had a decent week with mining stocks, especially those with South African interests, blazing the trail. It looks as though that 21st Century Fox will have to up the ante for Sky above the current 1085p threshold.  BT lost out in terms of market share on the distribution coverage of sport to Sky.  There was also a message to BT, which has already spent £5 billion on sport in recent years. Concentrate your efforts on broadband quality! Galliford Try surrendered 19% of its value in the wake of the Carillion crisis. Standard Aberdeen were rocked back on the heels in seeing £109 billion of funds withdrawn by Lloyds Banking Group courtesy of Scottish Widows. Barclays PLC was further indicted by the SFO to answer allegations, in connection with an irregular loan facility, offered to Qatar for taking an $11 billion stake. John Varley former CEO and three former directors have already been charged with similar allegations. This further charge may not serve a useful purpose.  The bank was undoubtedly saved by the deal and sufficient charges have already been proffered.  The Melrose/GKN takeover battle continues to rage.  The Government continue to look for assurances on security and shareholders of GKN insist the price is inadequate. Finally, the steel industry and the miss-selling of pensions was headline news and is not going away and many others may reason to be concerned about other sectors. And as an addendum the Sunday Times tells us that Sir Philip Green is seriously thinking of selling his Arcadia Group to Chinese textile operation Shandog Ruyl. Arcadia has 2800 outlets and 26,000 employees.

 

 

UK companies posting results this week – Monday – Reckitt Benckiser, Fidessa, MJ Gleeson, Tuesday – HSBC, BHP Billiton, Intercontinental Hotels, Tristel, Dunelm, Wednesday – Glencore, Metro Bank, Barratt Development, FirstGroup, Hochschild Mining, Thursday – Anglo-American, Centrica, Go-Ahead, TBC Bank, , BAE Systems, BATS, Hays, Northgate, Kaz Mining, Intu, Serco, RSA. Rathbones, Moneysupermarket. Lloyds Banking Group, Barclays, Safestore, Friday – RBS, Pearson, IAG, Standard Life Aberdeen, Rightmove, William Hill

 

US companies posting results this week – Tuesday – Walmart, Home Depot, MGM Resorts, Wednesday – Dynergy, Wendy’s, Thursday – Hormel Foods, HWP, BJ Restaurants

 

Economic data posted this week – Monday – Rightmove UK House prices, Tuesday – CBI Industrial trends, Germany’s ZEW, Wednesday – UK Labour statistics and PSBR, UK PMI Manufacturing & Services, US PMI Manufacturing & Services, , US Existing Home Sales, US FOMC minutes, Thursday – 2nd UK GDP estimate

 

David Buik

Communications

Mobile – 07788 144 877

 

Spread bets and CFDs are leveraged products, which means you could lose more than you deposit. You should ensure spread betting meets your investment objectives. View full risk warning

This email neither constitutes, nor is to be construed as an offer to buy or sell investments. The information and opinions expressed herein are based on sources we believe to be reliable but we do not represent that they are accurate or complete. No liability is accepted by Core Spreads for any direct or consequential loss arising from this email. Please carry out your own virus checks.

Core Spreads  is a trading name of Finsa Europe Ltd, a company registered in England and Wales under number 07073413, which is authorised and regulated by the Financial Conduct Authority under firm reference number 525164. Registered Office: Tower Bridge Business Centre, 46 – 48 East Smithfield, London, E1W 1AW, United Kingdom. www.corespreads.com is owned and operated by Finsa Europe Limited. © 2018 Core Spreads.

MARKET UPDATE

With Asia having attempted initially to blaze the trail without the same level of conviction as the Street of Dreams did on Friday, it would have been unreasonable to expect Europe to open without a high degree of circumspection and that it is what was delivered.  Last week’s volatility was still fresh in everyone’s mind.  The FTSE 100 opened flat but during the morning the performance of the miners with BHP (+1.8%), Anglo American (+2.7%), Vedanta (+2.21%) and Glencore (+2.5%) to the fore, giving the FTSE 100 just a tiny bit of momentum, thus preventing it from falling below the Plimsoll line.  At 4.10pm the FTSE 100 was up 18 at 7195. The FTSE 250 was down 32 points at 19347 (down 6% since 26/1/18).  Tui’s quarterly results saw good holiday sales for the summer with business in Turkey and Tunisia being booked again – shares up 2.5%, having been up 5.5% at one time. Capita continued its journey south – down 2%.

 

With inflation being maintained at 3% thanks in the main to oil prices, the Pound firmed a tad to $1.3850, with the threat of a higher rate increase in May. In all fairness, with the Pound significantly higher than a year ago, it is not unreasonable to comment that inflation to fall to 2.5% in the 4th quarter. At the same time this AM many investors also left the Dollar friendless in the ring in favour of the Yen at Y107.54. The market correction and spike on bond yields scared professional investors, according to the February Bank of America Merrill Lynch Fund Managers Survey. Investors sliced bond allocations to their lowest level since 1998, with a net 69 percent underweight fixed income. Cash allocations rose and exposure to stocks also declined.

 

On the Street of Dreams at 4.15pm GMT the DOW is down 100 points; not surprising considering Friday’s rally.  PepsiCo share price was flat and Metlife was 0.67% to the good, both having satisfied their acolytes.

 

David Buik

 

Communications – 07788 144 877

 

www.finsamarkets.com

 

CFDs and Spread Betting are leveraged products and carry a high level of risk. You can lose more than your initial deposit so you should ensure CFD trading and Spread Betting meet your investment objectives. This email neither constitutes, nor is to be construed as an offer to buy or sell investments. The information and opinions expressed herein are based on sources we believe to be reliable but we do not represent that they are accurate or complete. No liability is accepted by Finsa Europe Limited for any direct or consequential loss arising from this email. Please carry out your own virus checks. Finsa Europe Limited is authorised and regulated by Financial Conduct Authority (Firm Reference Number: 525164)

WEEKLY FAYRE

WEEKLY FAYRE – Monday 12th February 2018

 

“Now is the winter of our discontent

Made glorious summer by this sun of York;

And all the clouds that lour’d upon our house

In the deep bosom of the ocean buried.

Now are our brows bound with victorious wreaths;

Our bruised arms hung up for monuments;

Our stern alarums changed to merry meetings,

Our dreadful marches to delightful measures.

Grim-visaged war hath smooth’d his wrinkled front;

And now, instead of mounting barded steeds

To fright the souls of fearful adversaries,

He capers nimbly in a lady’s chamber

To the lascivious pleasing of a lute.

But I, that am not shaped for sportive tricks,

Nor made to court an amorous looking-glass;

I, that am rudely stamp’d, and want love’s majesty

To strut before a wanton ambling nymph;

I, that am curtail’d of this fair proportion,

Cheated of feature by dissembling nature,

Deformed, unfinish’d, sent before my time

Into this breathing world, scarce half made up,

And that so lamely and unfashionable

That dogs bark at me as I halt by them;

Why, I, in this weak piping time of peace,

Have no delight to pass away the time,

Unless to spy my shadow in the sun

And descant on mine own deformity:

And therefore, since I cannot prove a lover,

To entertain these fair well-spoken days,

I am determined to prove a villain.”

 

 

 

William Shakespeare – poet & playwright – 1564-1616

 

    I must have seen RC Sherriff’s play ‘Journey’s End’ at least three times and always found this WW1 drama set in the trenches on the Somme over 3 days in March 1918 both harrowing, terrifying with a totally futile outcome.  The horrendous loss of life through dogged patriotism and stupidity coupled wholly inadequate preparations made this recently released Saul Dibb’s film adaptation extremely moving and very traumatic. There are some outstanding performance from Paul Bettany (Osborne), whom I haven’t seen since ‘Wimbledon’ and ‘Master & Commander’, Sam Claflin (Captain Stanhope), Asa Butterfield (Raleigh), Toby Jones (Mason the quartermaster) and that brilliant scouse actor Stephen Graham (Trotter). This is one not to be missed – brilliant cinematography and fine acting!

 

The intensity of the England v Wales at Twickenham was there for all to see – the passion and fierce/brutal level of contact was inspirational, but I am not sure that international rugby is the visual spectacle it once was! I suspect I will receive a tirade of disagreement! England ground out their 12-6 victory but should have killed the match off early in the second half, though Wales will feel aggrieved at having Hanscomb’s try disallowed. The better side won!

 

 

All financial market practitioners, if they are truly honest with themselves, must have expected last week’s sharp, volatile and measurable correction to global equity markets – and if not last week, surely imminently? The 40% rally in the DOW in 14 months since the start of the Trump dynasty, exacerbated by January’s unprecedented massive crescendo of frothy gains, triggered by the President’s much vaunted taxation cuts, surely meant that we investors were in ‘La-La-Land!’ The fact that fund managers put $102 billion in to the market in January beggared belief in the circumstances, considering the lofty valuations that prevailed. Even I saw a ‘retrenchment’ coming and flagged it up in December. Company valuations were just too rich when measured against growth prospects, despite the upbeat outlook for the world’s economy. Perhaps we all needed to ‘wake up and smell the coffee!’ Set out below is a table as to how each major index faired since 26th January, when traders started to fall out of love with their bloated positions by taking some risk off the table.

 

INDEX 26/1/18 9/12/18 % loss % loss last week
DJIA 26616 24190 -9.1% -7.8%
S&P 500 2872 2619 -8.8% -7.5%
NASDAQ 7505 6874 -8.4% -5.1%
FTSE 100 7665 7092 -7.5% -4.7%
XETRADAX 13298 12107 -8.9% -5.3%
CAC40 5529 5079 -8.1% -5.3%
HANG SENG 33154 29507 -11.0% -7%
NIKKEI 23631 21382 -9.5% -8.1%
SHANGHAI COMP 3558 3129 -12.1% -8.3%

 

 

I think what puzzled us all more than anything else was the manner of the pull-back and the extreme volatility that accompanied it.  We should not be that surprised really.  After all, market business is transacted by way of technology.  There are so many exchanges now, that it is impossible to monitor flows.  The best part of 40% of trades in shares executed are programme trades geared to algorithm trading or emanating from futures and derivative operation. So, no one should be remotely surprised that the spivs and vagabonds more than got in on the act, triggering seismic daily volatility.  Having seen what happened in stock market crashes,1987, 1996, 1998, 2000 and 2008/9, the daily volatility never reached the intensity that we have seen in the last two weeks. This time there was one other factor to take note of – There were variable annuities – a popular tax-advantaged insurance company product, offering guaranteed revenue that helped exacerbate the level of volatility according to the FT.

 

There are two other ingredients that were not prevalent in yesteryear.  Firstly, quantitative easing has been in situ for a decade, possibly supplying a soft belly for investors, who have understandably filled their boots and very beneficial it has been too.   The US and Japan have started to taper QE, but the EU was 5 years behind the curve and is just about at the zenith of its enjoyment – hence its economy is rather more robust than the UK’S at present. We await news from the BOE’S £475 billion QE facility, though its small beer in comparison to the US’S $4.5 trillion fund. Part of my beef about what appears to have been the disorderly behaviour of the market place is the role played by the Central banks. Though they find themselves in an invidious position, their adoption of forward guidance is surely flawed.  Take the case of BOE’S Mark Carney.  He has been consistently, as have many of the world’s economic luminaries, telling us that the UK economy is going to ‘hell and a hand cart’ in so many words; yet last week the BOE upgraded growth for the UK from 1.5% to 1.7% for 2018 and consequently rates may have to rise twice this year. Maybe I am being naïve, but I find all this very misleading. However much ‘huffing and puffing’ there is over inflation and the threat of rate increases the dangerous level of debt both national, international, corporate and consumer is at breaking point, as pointed out last week by Lord Mervyn King. So, we have had near enough a 10% correction.  It should be enough, but the day trader element may not have had enough bites at the cherry! It was interesting to note that last week U.S. stock funds saw a record $23.9 billion withdrawn by investors in the last week, according to Thomson Reuters data.

 

Last week was an important week for earnings on both sides of the pond – Here in Old Blighty BP did well, Glaxo was encouraging, Rio was satisfactory. Tesco may have problems with equal pay which could cost another £4 billion in back pay. Finally the government may come to GKN’S  rescue over the Melrose hostile £7.4 billion bid on security grounds.  In the US, Twitter rose by 12%, with Walt Disney and Viacom satisfying their acolytes.  Earnings? Pha! They almost went unnoticed in the rubble of the daily turmoil.  The next wo weeks will be fascinating.  The fundamentals have not changed for the world’s economy.  However, do investors believe it or will they be allowed to?

 

UK companies posting results this week – Monday – Acacia Mining, Tuesday – Tui Travel, Wednesday –  Relx, Coca-Cola EP, Galliford Try. Shire, Thursday – Aveva, Friday – Segro

 

US companies posting interim results – Monday – Loew’s. Tuesday – PepsiCo, Metlife, Wednesday – Hyatt Hotels, Cisco systems, Marathon Oil, Marriott, Thursday – Omnicom, Friday – Kraft Heinz, Campbells Soups, Coca-Cola, Deere & Co

 

 

Economic data posted this week – Tuesday – UK inflation Data, Wednesday – US CPI & Retail Sales, Thursday – US PPI, Industrial Production and Car Registrations, Friday – UK Retail Sales and US Housing data.

 

 

David Buik

Communications

Mobile – 07788 144 877

 

CORE SPREADS

 

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WEEKLY FAYRE

THE WEEK’S FAYRE– Thursday 1st February 2018

 

“Room after room,

I hunt the house through

We inhabit together.

Heart, fear nothing, for, heart, thou shalt find her—

Next time, herself!—not the trouble behind her

Left in the curtain, the couch’s perfume!

As she brushed it, the cornice-wreath blossomed anew:

Yon looking-glass gleamed at the wave of her feather.

 

Yet the day wears,

And door succeeds door;

I try the fresh fortune—

Range the wide house from the wing to the centre.

Still the same chance! She goes out as I enter.

Spend my whole day in the quest,—who cares?

But ’tis twilight, you see,—with such suites to explore,

Such closets to search, such alcoves to importune!”

 

Robert Browning – poet – 1812-1889

 

Most people would probably agree that Muhammad Ali was possibly the most revered sportsman in the 20th and 21st century – known, liked, admired by all age groups across the universe. However if there were a poll, I think Roger Federer might start to run him very close. To be still playing at the highest level at the age of 36, having one 20 grand slams, which is unprecedented, is phenomenal.  He is a supremely graceful artist.  He has never wavered in his resolve to play top-class tennis, despite his advancing years.  Add to that the fact that his behaviour and sportsmanship have been impeccable, adds greatly to the attraction to the sporting public.  He is very approachable and very international, speaking about 5 languages. Even though tennis is not really my game, as an international brand, today he has no peer! If tennis was a team sport, he would leave everyone in his wake.

January was quite a month for equities. Up until Monday’s sell-off the main US equity bourses had made gargantuan gains in four weeks adding between 7-8% in value in those four weeks.  Much of it down to the Trump tax cuts, expectations for infrastructure spending and decent earnings. The market has looked a little bloated and over-valued; hence the sharp healthy 2-day correction – the biggest for 5 months. It may continue for a bit, but good dividends and plenty of money to meet the challenges of a buoyant economy may arrest any serious fall. Few have missed that rally in US Treasury 10-year yield heading towards 3% (2.71%).

Last week the Davos ‘bunfight’ brought the good and the great from politics, business and entertainment together at gargantuan expense.  No one was much interested in the proceedings apart from President Trump’s visit, the first by a US President since Clinton 18 years ago. His upbeat assessment of the US economy was endorsed in last night’s State of the Union address, where he also emphasized the importance of international trade, but fair trade – China, EU and NAFTA prenez-garde!  The UK posted decent employment data and lower borrowing requirements last week. Nonetheless the perception of the UK’s economy is dogged by the uncertainty from the outcome of BREXIT, exacerbated by a weak showing from the PM’S government. Leaked adverse data was not very well received particularly as the government refuse to distribute it. The turmoil over Carillion and the damage it has done to suppliers and to its pension funds has provided unhealthy publicity for its directors, politicians and corporate governance.  It was interesting to note that the UK’S 2017 Annual Growth came in at + 1.8%. Forecasts for last year were as follows: Mark Carney/BoE 0.8%, Barclays 0.7%, CEBR 0.8%, BofA-ML 0.9%, RBS 1%, Morgan Stanley 1%, EU Commission 1%, IMF 1.1%.

Now that January is all but over, the news flow has gathered momentum.  In the US it is all about earnings.  Defence stocks such as Lockheed Martin have passed muster. Pfizer beat expectations with something to spare, but it has had a decent run on the rails, which saw investors take some risk off the table (-2.01% yesterday). Facebook posted astonishing numbers last night with over 2 billion users generating a staggering $28.7 billion in 2017 with sales up 47%, with revenue of over $9 billion coming from the last quarter. Mark Zuckerberg has governance and behavioural issues to deal with as well as fierce competition from Instagram, Snap chat and WhatsApp. Shares have risen over 40% in the last year. eBay also passed muster.  Today is a huge day for tech on the Street of Dreams with Apple, Alphabet, Amazon all stepping up to the plate in having their numbers closely scrutinised. FED chairman Janet Yellen gave her valedictory FOMC statement, announcing no change in rates but maintaining the prospect of 3 hikes this year. Inflation is just heading towards 2% with wage inflation up from 2.4% to possibly reach 2.8%. She hands over to Jerome Powell, whose conservative approach is akin to Yellen’s but he is likely to accommodate Trump on deregulation, particularly the banks.

Back here in Old Blighty there have been issues concerning Capita, following in the wake of Carillion – shares fell 45% on a profits warning and news that £700k would be required to boost the balance sheet. In June 2016 Capita shares stood at £1100 and are now 181p – oh dear! Panmure Gordon’s Michael Donnelly has had them as a ‘sell’ since their height eighteen months ago.   M&S will be closing another 8 stores which could affect 463 jobs.  M&S’S problem is fashion – theirs are dowdy.  The market is competitive.  I am sure that Archie Norman and Steve Rowe are very cognoscent of this fact. The shares are depressingly anaemic at 301p. There were a slew of earning this morning – some slightly disappointing. Unilever saw 4th quarter sales up 4% but there was some severe discounting – shares down 0.5%, having been down 0.23% at the opening. Vodafone only saw 1.1% organic sales growth to £11.8 billion – shares down 0.9% having been 1.5% easier at the ‘off’. Royal Dutch Shell posted superficially very good numbers with profits up 24% to $4.3 billion for the last quarter – not attained since crude oil was $100 a barrel. However there appeared to be a few cash flow issues – shares were down 0.7% having been down 1.7% at the opening. The FTSE at one point was down 54 points but at 9.29am it is up 6 points at 7540.

UK Companies posting results this week – Thursday – Royal Dutch Shell, Unilever, RPC Group, 3is, Cranswick, Vodafone, Euromoney, Rank, AG Barr, Glencore, Friday – Astra Zeneca, BT, AON

US companies posting results this week Thursday – MasterCard, Altria, Time Warner, Hershey, Conoco-Phillips, Amgen, Motorola Solutions, Apple, Alphabet, Amazon, Visa, Mattel, Friday – Ester Lauder, Exxon Mobil, Chevron, Johnson Outdoors

 

Economic data posted this week – Thursday – US Construction Spending, US & UK PMI Manufacturing, Friday – UK PMI Construction