Monthly Archives: March 2018

NEX – IT LOOKS AS THOUGH IT WILL FALL IN TO THE CLUTCHES OF CME – OR IS THERE A TWIST TO THIS TALE?

NEX – IT LOOKS AS THOUGH IT WILL FALL IN TO THE CLUTCHES OF CME – OR IS THERE A TWIST TO THIS TALE?

 I have always considered Michael Spencer to be not only a very shrewd business man, but also a lucky one and a person with a generous heart. Talent and luck work well together. Michael Spencer built ICAP up over 30 years to be the most progressive and innovative IDB in the world, bar none.  ICAP captured the derivative markets before most other brokers had woken up to how the financing of loans and the bond market had changed irrevocably. ICAP, having gone public in 1998 went into the FTSE 100 in 2006, such was the success of the company.

 

Michael Spencer introduced ICAP’S charity day in 1993 and over £140 million has been raised for charitable causes since then – a staggering feat. Unfortunately, ICAP was fined £55 million by the FCA in 2013 for a LIBOR misdemeanour, even though his staff were found not guilty in Court as individuals. Unfortunately, this prevented Spencer from receiving a peerage, which he richly deserved for charitable reasons, if not for an amazing contribution to the success of the City of London, which started before ‘Big Bang!’ ICAP’S business was split last year with the voice broking operation going to Tullett Prebon. The company was renamed TP ICAP. Spencer retained the tech broking side – renamed NEX.  Few prizes for guessing who was on the better side of this deal, though TP ICAP remains a power in the land of IDBs.

 

Few observers were ever comfortable with Deutsche Borse’s bid for the LSE. It was called off.  Once it was clear that Xavier Rolet was going, I was very keen on the idea of LSE either buying or merging with NEX with Michael Spence becoming CEO of the joint operation. I think it was always a non-starter. It would have been the perfect marriage! NEX’s prowess in fixed interest bonds and derivatives dovetailing in to the LSE and equities.  Spencer never really got any kind of a stranglehold on equities or futures over a long and distinguished career. It was never to be – or could the LSE come and talk to NEX about a tie-up – I think not; terms appear to have been agreed between the two parties. So, the CME will be scooping up NEX for £3.8 billion (circa £10 a share)?  NEX’S share price has rallied from 606p on 29th December 2017 to 972p yesterday. CME has agreed in principle pay £10 a share for NEX. The deal would be structured as a cash payment of £5 and 0.0444 new CME shares per NEX share. NEX said it would recommend the deal to shareholders.

 

CME buying NEX makes perfect business sense – the businesses look to be quite synergistic. Also, even though CME have a reputation for asset stripping and cutting costs to the bone, this policy may not be applicable in this case.  I suspect that any deal consummated between CME and NEX might exclude Spencer, which would be a great pity. He is a real City stalwart.  If all else fails, maybe Michael could be persuaded to run the LSE!  That would ruffle a few feathers!

 

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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US EQUITIES HAVE TAKEN QUITE A CLATTERING – ARE WE FINISHED?

US MARKETS HAVE TAKEN QUITE A CLATTERING – ARE WE FINISHED?

 

COMPANY Price 26/1/18 Price 23/3/18 % rise/fall
Apple $171.51 $164.94 -9.1%
Alphabet $1187.56 $1026.55 -14%
Amazon $1402.05 $1535.57 +9.4%
Snapchat $13.56 $16.36 +20.6%
Twitter $24.27 $31.03 +16.4%
Intel $50.08 $49.36 -1.4%
Cisco Systems $42.56 $42.42 -0.3%
Facebook $190.00 $159.39 -16.1%
Microsoft $94.06 $87.18 -7.3%
General Electric $16.13 $13.07 -18.9%
Texas Instruments $113.69 $101.36 -10.8%
McDonald’s $178.36 $154.98 -13.1
Goldman Sachs $268.14 $245.26 -8.5%
JP Morgan $116.32 $107.01 -8.0%
Caterpillar $167.06 $144.29 -13.6%
Walmart $108.39 $85.42 -21,2%
Boeing $343.22 $321.00 -6.5%
General Dynamics $226.24 $218.37 -3.5%
Procter & Gamble $87.73 $75.91 -13.5%
Target $76.95 $67.88 -11.8%
Pfizer $39.01 $34.49 -11.6%
Merck $62.04 $53.41 -13.9%
Lockheed Martin $344.90 $336.31 -2.5%
Exxon Mobil $89.00 $72.89 -18.1%

 

Most investors look at the performance of individual stocks they are involved in, on a minute by minute basis.  However, one tends to forget what has happened over a period of a month or two.  We have had the most tumultuous start to the year, I can ever remember, with perhaps the pull back from the ‘TNT’ debacle in 2000 running it close!

 

The Trump syndrome – alias tax cuts and threatened infrastructure spending – sent equities in to orbit, even though most global indices had overly rich and very frothy valuations. Most analysts put the most recent sell-off down to Trump’s trade tariff war with China and the EU.  I think that assessment has credence, but I believe we have all underestimated the damage inflicted by general geopolitical unrest – Trump behaving like a loose cannon and changing his executive appointments more often than most people change their under-garments, Putin behaving like a hoodlum on the global stage and turmoil continuing to prevail in the EU/UK severance agreement, whatever we might all read or hear to the contrary.

 

Some of the losses made in the past two months have been severe. Yes, some tech operators have suffered. However, GE, Walmart and Target have been trashed in a manner one would not expect from three large household names. So, despite all the attention given to politics, these operators have under-performed and consequently investors have vented their spleens. These stocks have only been chosen at random.  However, they are not a bad barometer of the climate that has prevailed in recent weeks. With the sun now higher on the yardarm, some of these share prices have improved by between 2% and 5% yesterday, as the ‘big-bears-in-the-pit’ start to calm down!  This is not meant to be an erudite piece.  It is just an illustration of the market’s high expectations and its frustrations.  Even banks suffered, which is surprising as the fundamentals have not changed, with 3-4 rate hikes expected. Defence industry acolytes suffered least. How about that great GOD, Amazon – what a performance!

David Buik  

Communications

Mobile – 07788 144 877

 CORE SPREADS

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 26th March 2018

 

“She looked like a bird from a cloud

On the clammy lawn,
Moving alone, bare-browed
In the dim of dawn.
The candles alight in the room
For my parting meal
Made all things withoutdoors loom
Strange, ghostly, unreal.

 

The hour itself was a ghost,
And it seemed to me then
As of chances the chance furthermost
I should see her again.
I beheld not where all was so fleet
That a Plan of the past
Which had ruled us from birthtime to meet
Was in working at last:

No prelude did I there perceive
To a drama at all,


Or foreshadow what fortune might weave
From beginnings so small;
But I rose as if quicked by a spur
I was bound to obey,
And stepped through the casement to her
Still alone in the gray.

 

“I am leaving you . . . Farewell!” I said,
As I followed her on
By an alley bare boughs overspread;
“I soon must be gone!”
Even then the scale might have been turned
Against love by a feather,
– But crimson one cheek of hers burned
When we came in together.”

 

 

Thomas Hardy – author & poet – 1840-1928

 

 

  

 

   Stephen Smith may be the best batsman in the world, but ever since that incident at Lords involving Mitchell Starc and Ben Stokes’s dismissal, I’ve never liked the cut of his jib! There’s tough and there’s fair! Time for a new broom! The bans imposed on Smith and Bancroft are derisory at best and pathetic at worst. Here’s hoping Cricket Australia mete out proper punishment befitting the crime.

    

 

INDEX 19/3/18 23/3/18 % gain/loss
FTSE 100 7164 6921 -3.4%
XETRA-DAX 12346 11886 -3.7%
CAC40 5263 5095 -3.2%
DJIA 24893 23533 -5.5%
S&P 500 2741 2588 -5.6%
NASDAQ 7419 6992 -5.8%
Hang Seng 31370 30309 -3.4%
Nikkei225 21876 20617 -5.8%
Shanghai Composite 3264 3152 -3.4%
       

 

INDEX 2/1/18 23/3/18 % gain/loss
FTSE 100 7648 6921 -9.5%
XETRA-DAX 12871 11886 -7.7%
CAC40 5288 5095 -3.6%
DJIA 24824 23533 -5.2%
S&P 500 2696 2588 -4%
NASDAQ 7007 6992 -0.2%
Hang Seng 30515 30309 -0.6%
Nikkei 23506 20617 -12.3%
Shanghai Comp 3348 3152 -3.3%

 

26/1/18 – DJIA – 26616 – 23533 – –11.5%

26/1/18 – NASDAQ – 7505 – 6992 – -6.8%

26/1/18 – FTSE – 7665 – 6921 – -9.7%

26/1/18 – DAX – 13450 – 11886 – -11.6%

 

After the hybrid level of euphoria, triggered by Trump’s tax cut initiative in January which took global stock markets to record levels, unsurprisingly fund managers experienced quite a sharp correction of about 5% in late January/early February. These bourses were over-cooked, overvalued with some political imponderables constantly nagging away at investors’ confidence. Markets did recover a little poise but there was a total lack of conviction on many fronts. This week, ironically geopolitical issues have dominated the agenda, rather than economic and corporate issues, and these problems will not go away swiftly.  Hence, last week investors vented their spleens on all global bourses in a very pernicious manner (see tables above). BREXIT hovered around Europe like a bad dose of halitosis. Then in the past two weeks President Trump has raised his game with China with potentially a $60 billion tariff charge on steel and aluminium imports.  China has threatened similar tariffs on food, coffee and clothes! This spat does not look as if it will end well! China is the US’s 3rd largest export market as well as being its largest foreign owner of Treasuries. So, let’s be under no illusion China has considerably more leverage over US than Washington politicians care to admit.  There were also some disappointing PMI numbers from the EU and Germany last week. To put a final sour taste on events from ‘left field’ Facebook’s and Cambridge Analytica’s abuse of personal data really rattled tech stocks’ cage, with Facebook itself losing the best part of 10% ($60 billion) in value last week. Ironically on Friday ‘Dropbox’ had its IPO and the shares closed 36% to the good!

 

Then of course the UK has been outraged by Russia’s antics over criminal nerve-gas intrusion in Salisbury.  Though support has been quite solid on an international basis, it has not been wholesome, with Jeremy Corbyn adopting a contrarian approach.   Trump has been rather frivolous towards this alleged attack and the EU, though superficially defiant in concert with the UK, has made sure its bread was buttered on both sides for pragmatic purposes. President Trump really is going for broke declaring war on 3 fronts: antagonism towards Bob Mueller, economic attrition towards China/others on trade, and a jingoistic attitude towards Iran. North Korea currently seems to amuse the US President like a ‘Punch & Judy’ side show. This is turning out to be one of the most perilous moments in modern American history. On Friday President Trump dismissed HR McMaster as head of National Security replacing him with the pugnacious John Bolton. It strikes me that the President changes his key administration personnel more regularly than we change our undergarments.

 

For good measure the FOMC raised rates by 0.25% – maybe one of four hikes scheduled for this year.  However, President Trump’s trade war could take its toll on GDP – so Chairman Jay Powell may have to reconsider the FED’s plans later in the year. Here in Old Blighty the MPC voted 7-2 to keep rates where they are, after inflation fell from 3% to 2.7% last month’s thanks to lower food and travel prices.  Again, the MPC has never been happy about BREXIT. However, it has had to upgrade growth.  Rates are due to rise by 25 basis points to 0.75% in May. However, the better than expected inflation number leaves the MPC in a bit of a conundrum. It will be hoping that wage inflation continues to select another gear.

 

Irrespective of politics there was some interesting corporate news to ruminate over. In the US Oracle posted what appeared to be rather anaemic growth progress of about 1% on the year with revenues of $9.7 billion. Overall M&A activity largely remained in the in-tray, due to negative market sentiment.

 

On this side of the Pond Ocado saw an 11% increase in sales for the past 13 weeks of £363m with baskets of goods increasing in size and value. Kingfisher’s numbers and anxiety waves from Moss Bros and House of Fraser continued to flag up retail’s brittle and parlous state. 888Holdings posted a 4% increase in sales to £542 million on the equivalent quarter last year. The downbeat performance of WPP this year with shares falling circa 35% will mean that Sir Martin Sorrell’s bonus will only be £12million – far cry from the £70million a couple of years ago. Barclays saw a 5% stake taken by Sherborne’ Edward Bransom with mixed reactions. With HSBC focused on the Far East, Barclays is the only UK bank with a strong presence in investment banking in the US. Now that most of the skeletons are out of Barclays cupboard, growth opportunities are obvious, particularly with Trump relaxing regulation obligations. Any attempt to break up Barclays should be resisted.

 

France’s Klepierre is looking to spoil Hammerson’s party by possibly bidding £5 billion for this company, which might prevent Intu being bought. Not to be outdone, Michelin has bid for Fenner, which saw the latter’s share price rally by 24%. Micro-Focus’ reverse takeover of a HWP division seems to have turned sour after estimates for income for 2018 would fall by 6-9%. Shares fell by 50% on the week. On Thursday Reckitt Benckiser shares jumped 4% on news that it had ended discussions with US pharmaceutical giant Pfizer about acquiring part of its $20bn Consumer Healthcare business. On Friday, GlaxoSmithKline shares are up almost 4% after it too had pulled out of talks with Pfizer about its Consumer Healthcare division, stating that new opportunities “must meet our criteria for returns and not compromise our priorities for capital allocation” which suggests the deal was too expensive. Melrose’s hostile £8 billion cash and share bid for GKN garnered some investment muscle on Friday from Elliott. Despite opposition to the bid, Melrose still feels it has unfinished business.

 

UK companies posting results this week – Monday – Pennon, Tuesday – AG Barr, Moss Bros, United Utilities, Churchill China. HIS Markit, Wednesday – AA, DFS Furniture, Tui Travel, Thursday – CMC Markets, RPC

 

 

US companies posting results this week – Monday – Red Hat, Tuesday – Sonic, Thursday – Constellation Brands

 

 

Economic data posted this week – Wednesday – US Trade Balance & GDP estimate, Thursday – UK lending data, UK revised GDP estimate, Gfk Consumer Confidence

 

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 March 2018

 

When Beauty and Beauty meet
All naked, fair to fair,
The earth is crying-sweet,
And scattering-bright the air,
Eddying, dizzying, closing round,
With soft and drunken laughter;
Veiling all that may befall
After — after —

Where Beauty and Beauty met,
Earth’s still a-tremble there,
And winds are scented yet,
And memory-soft the air,
Bosoming, folding glints of light,
And shreds of shadowy laughter;
Not the tears that fill the years
After — after – “

 

Rupert Brooke – poet – 1888-1915

 

 

I have been going to Cheltenham for more than 30 years and have seen some wonderful races and some champion horses in action from ‘Arkle’, to ‘Desert Orchid’ to ‘See You Then’ to ‘Istabraq to ‘Kauto Star’ to ‘Mastermind’ to ‘Sprinter Sacre’ – the list is endless! However, I have never witnessed Gold Cup excitement that was on display last Friday when ‘Might Bite’s’ colours were lowered in the last half furlong by ‘Native River’, brilliantly ridden by the champion jockey Richard Johnson to out stay the ‘Seven Barrow’s handler’ steed by 4.5 lengths.  ‘Might Bite’ would almost certainly have won on ground that was less than desperate.  Take nothing away from Native River’s blue riband performance – one of staggering bravery, but the conditions were always in his favour.  It was a 2-horse race throughout the 3 miles 2 furlong marathon chase, where they went a real gallop in testing ground with some spring-healed, pulsating and spectacular fencing with very few mistakes in evidence! That is easily the best Cheltenham Gold Cup I have ever watched!

 

It is astonishing how a country like Ireland including the North, with a total population of 6.5 million can beat its neighbour, England, with a population of 53 million, so comprehensively to win the Grand Slam at Rugby, even accepting that football is England’s national game. This Ireland did on Saturday with a little bit in hand! Congratulations!

    

 

INDEX 12/3/18 16/3/18 % gain/loss
FTSE 100 7224 7164 -0.83%
XETRA-DAX 12453 12389 -0.51%
CAC40 5298 5282 -0.31%
DJIA 25372 24946 -1.67%
S&P 500 2791 2752 -1.39%
NASDAQ 7581 7481 -1.32%
Hang Seng 31536 31501 -0.11%
Nikkei225 21826 21676 -0.69%
Shanghai Composite 3319 3270 -1.47%

 

 

It was the considerable uncertainty surrounding several geopolitical issues that saw global equities surrender some measurable value last week, rather than any dismal economic news or corporate shortcomings.

 

What a compendium the threat of Trump’s trade tariff plus a little side order (the dismissal of Andrew McCabe from FBI), the UK’s spat with Russia over allegation of nerve gas on the Streets of Salisbury, condemned in unison by the Western world and the omnipotence of President Xi in China, make up! Some believe that Boris Johnson’s over exuberant comments about Putin’s and the Kremlin’s personal involvement have not helped to lower the diplomatic temperature. As a generalisation, if those issues occurred in a month, it might be a cause for worry, let alone a week! Even the deliberation over the UK’s withdrawal from the EU, where inertia seems to have set in, took a back seat, almost paling into insignificance.

 

Across the Pond news filtered out that Broadcom’s enthusiasm to add Qualcomm to its portfolio was put on the back burner. The deal is now off, with President Trump intervening, despite Broadcom being prepared to have US status. Trump also made his presence felt, with Treasury Secretary Mnuchin rejecting EU plans to invoke a realistic digital levy out of the like of Apple, Google, Facebook. This move by the EU is of course in retaliation to steel and aluminium tariffs. Retail stocks suffered with Tiffany’s results failing to sustain the better performances in November and December – down 5%. JP Morgan, Goldman, Caterpillar, Amazon, Apple, Microsoft and Alphabet all surrendered between 1.5% and 3% on the week. Bond yields rose in expectation of further FED rate hikes as did the value of the Greenback.

 

In Old Blighty, the ongoing takeover battle between Melrose and GKN, with Airbus feeling out of the loop and therefore threatening withdrawing support, the repatriation of Unilever to Rotterdam, Shell’s Van Beurden’s £7.9m bonus, and Michael Spencer’s NEX possibly falling into the loving arms of CME, grabbed the main headlines. Maybe I should also include Prudential splitting its business in to two!

 

Though Melrose’s hostile bid remains in doubt, what is clear is that the consummation of this deal will incur fees totalling a gargantuan £82 million to the likes of JPM, UBS, Slaughter & May and Gleacher Shacklock, flagged by the distinguished Neil Collins in Saturday’s FT – nice work!

 

So much brouhaha has been ‘made out’ of Unilever decision to repatriate exclusively to Rotterdam. The ‘Remainers’ just loved the raw flesh to gnaw on! Not so! I suspect Polman’s board see tax advantages, one board of directors rather than 2, one set of corporate laws rather than 2, one set of shareholders and administrative cuts in costs. The move will not be without turmoil as Unilever could lose the support of tracker funds. Having seen its share price drop sharply, if Unilever is to avoid attention from potential predators, best it goes on the front foot and acquire synergistic operations such as Estee Lauder or Colgate-Palmolive. Paul Polman is scheduled to leave soon. Who could replace him? – Vittorio Colao of Vodafone and Unilever’s CFP Graeme Pitketling are amongst the front runners.

 

Finally, to Michael Spencer’s NEX – the possible target of CME’s affections. Though Spencer has been an arch critic of CME’s domination of global futures, he has never been one to allow emotions to get in the way of a pragmatic deal that makes business and financial sense. For me this deal ticks all the boxes. Though for several decades ICAP/NEX has been at the pinnacle of inter-broker dealing operation, it has never been able to get a handle on a decent market share of equity or futures. This can be achieved with this deal. I was a strong advocate of Michael buying the LSE or for that matter the LSE buying NEX with Michael replacing Xavier Rolet, when he goes. However, this deal looks even more sensible, though with the CME to the fore, will the Competition authorities whinge? I hope not. NEX’S shares were up 30% on Friday. Now that the horse has bolted there will be other predators that could throw their hat in to the ring! ICE, parent of the NYSE, could well be prominent in the bidding war, but its affections could also be headed in the direction of the LSE. Many observers suspect that the LSE and Deutsche Bourse could also pop their respective heads above the parapet as contenders to repulse the CME. So, £10 a share is likely to be the ‘business’ price rather than 870p!

 

 

FT said that global investors ploughed a record $43bn into stock funds and ETFs in the past week, with an inflow that exceeded the previous record set after the 2016 election of Donald Trump. The $34.9bn net inflow into funds tracking US stocks was big enough to help America shed a year-to-date outflow, according to EPFR data compiled by investment bank Jefferies tracking March 8 – 14. Within the US, the technology and consumer discretionary sectors both had record inflows at $8.6bn and $4.9bn respectively, while financials drew $6.8bn.

 

 

UK companies posting results this week – Tuesday – Faroe Petroleum, IQE, 888 Holdings, John Wood Group, Bellway, Ocado, Wednesday – Kingfisher, Ferrexpo, Vectura, Softcat, Thursday – Ted Baker, Genel Energy, Carnival, Halma, IG, Friday – NEXT

 

US companies posting results this week – Monday – Oracle, Tuesday – FedEx, AAR, Wednesday – General Mills, Thursday – Darden Restaurants, KB Homes, Micron Technology, Nike

 

Economic data posted this week – Tuesday – UK Inflation data & House Prices, Wednesday – UK PSBR, UK Net borrowing, US FOMC & Existing Home Sales, Thursday – MPC Meeting, UK Retail sales, US PMI, Friday – US Durable Goods and New Home Sales

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

Equity markets in London have been frustratingly dull, though the news flow has been almost electric – political, economic, corporate and sporting prowess, in no particular order! Funnily enough the least interesting news came from stock markets with the FTSE 100 down 36 points at 717 at 2.45pm, mainly down to the strength of the Pound – $1.3950 thanks to Trump irrationally hosing Tillerson (he read it on Twitter) for Mike Pompeo and hinting that Kudlow would replace Cohn as his economic advisor.  Then, just to ‘muddy the waters’ a little more, it could all go off with Russia ‘squaring up’ to the US in Syria.  Chancellor Hammond’s neutral budget comment of no change in policy had as much affect as a stale scone at a vicarage tea party.  Obviously, miners, oil and dollar related earnings have seen some cream skimmed off the top.

 

Of those companies reporting today they performed as follows – Antofagasta +2.3%, Cairn Energy -3.8%, Fever Tree -4.2% (profit taking after a great run) TP ICAP -9.6% (profits warning) and Computacenter (profits warning) -7.6%.  Across the pond the DJIA is up 81 points with little activity.  GE was down 4% before dealing started due to a negative note from JPM and JC Penney was 2% light.

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 12th March 2018

 

Earth has not anything to show more fair:

Dull would he be of soul who could pass by

A sight so touching in its majesty:

This City now doth, like a garment, wear

The beauty of the morning; silent, bare,

Ships, towers, domes, theatres, and temples lie

Open unto the fields, and to the sky;

All bright and glittering in the smokeless air.

Never did sun more beautifully steep

In his first splendour, valley, rock, or hill;

Ne’er saw I, never felt, a calm so deep!

The river glideth at his own sweet will:

Dear God! the very houses seem asleep;

And all that mighty heart is lying still!”

 

William Wordsworth – poet – 1770-1850

 

 

    I have been salivating at the prospect of seeing some great NH racing at the Cheltenham Festival, which starts on Tuesday.  We all know that Cheltenham can be a graveyard for punters.  However I think we have a great chance of seeing some real champions in the making land the spoils for their connections – “Getabird” in the opener the Supreme Novices Hurdle, ‘Bvveur D’Air’ retaining his crown in the Champion Hurdle, ‘Altior’ in the Arkle, ‘Sam Spinner’ in the Long Distant Hurdle and ‘Might Bite’ in the Gold Cup all look like ‘good things’ but how many times has that kind of comment been made in the past?  These horses tend to make fools of us! They have to be able jump obstacles and we tend to forget that fact from time to time. Good hunting! All things being equal, many believe that ‘Altior’ and ‘Might Bite’ are very special. The going looks like it will be ‘good to soft’ on Tuesday and Wednesday with the ground possibly drying out towards the end of this amazing week of NH racing. I saw Willie Mullins had a 5-times at Gowran Park on Saturday – a decent omen maybe?

 

    

 

INDEX 5/3/18 9/3/18 % gain/loss
FTSE 100 7069 7224 +2.19%
XETRA-DAX 11831 12346 +4.45%
CAC40 5116 5274 +3.08%
DJIA 24457 25335 +3.58%
S&P 500 2681 2786 +3.91%
NASDAQ 7222 7560 +4.68%
Hang Seng 30524 30996 +1.54%
Nikkei225 21072 21469 +1.88%
Shanghai Composite 3265 3307 +1.29%

 

 

Last week was again dominated by political events rather than by financial and economic issues. Italy’s PM Renzi’s left-wing party was booted in to the long grass, leaving the right – 5 Star, Forza Italia and Lega to scrap it out in attempting to form a coalition. Immigration and austerity have turned the beautiful people of Italy against the EU and this change in political emphasis could spell further trouble for Juncker and his federalist chums. Meanwhile across the Atlantic, President Trump threw down the gauntlet by imposing tariffs for imported steel and aluminium to all but possibly Canada, Mexico, Australia and maybe the UK, resulting in the resignation of his economic adviser Gary Cohn. Is this the start of a trade war? This would be regrettable and should be avoidable. There are signs that Trump may taper his demands, but initially the news had negative connotations with volatility returning to equity markets in seismic proportions. Unfortunately, EU’S Juncker’s response, despite his irritation, was infantile and unhelpful. If that was not enough, North Korea’s Kim Jong Un popped his head above the parapet suggesting through South Korea, that a meeting with Trump could well lead to the end of N Korea’s nuclear arsenal proliferation. It made great headlines, but I’ll believe it when I see it. Russian and China will be watching from the wings with a high degree of pre-prandial neurosis. They will not be amused by this initiative. The terrible and fearful nerve gas incident in Salisbury, with suggested Russian involvement and the tiresome EU/UK exchange of rudeness and sarcastic bile, sadly seemed to pale into insignificance, as the week wore on. 

 

This compendium of news made investors very neurotic in the early part of the week with again the teenage scribblers and algorithm traders exacerbating the level of volatility particularly in New York. By Thursday some decent data and a less draconian stance by Trump towards tariffs, the markets turned sharply positive and of course Friday’s stellar Non-farm payroll data was the icing on the cake for equities to end the week with some quite measurable gains (see above). 

 

313000 jobs were created in the month of February – way above the estimated +200k. The two interesting factors were firstly more people were looking for jobs than before with the unemployment rate falling a pip to 4%. Secondly wage inflation was relatively benign at 2.6%, below previous levels of close to 2.9%. Nonetheless, there were plenty of positive pointers for the Fed to move this month by putting rates up by 0.25% this month – the first of perhaps three hikes. However, another robust earning season will need to manifest itself to convince Chairman Powell and his board to continue increasing rates.

 

Of the 3 main US indices the NASDAQ was the most prominent, with Apple, Amazon, Facebook, Cisco, Intel and Alphabet all adding more than 3% in value on the week. The key DJIA stocks over the past 5 days were JP Morgan, Goldman, McDonald’s and Caterpillar. Even Walmart abated its recent catastrophic fall of 10% 2 weeks ago and added 1% on the week. Whilst commenting about retail activity, many stores have posted disappointing results. Those whose share prices have fallen from grace recently have failed to get to grips with their on-line service. Amazon has been rampant, but if the larger non-food retail operations get their act properly together, they could of course be competitive. On the M&A front it looks like Intel is going to muscle in the Broadcom/Qualcomm deal by bidding $100bn for Broadcom. Whilst at the same time Softbank is eying up a bid for Charter Communications. This week’s ECB meeting indicated that interest rates would be raised in mid-2019 after winding down their bond purchases (QE) at the end of this year. The MPC enjoyed a dispiriting end to the week, with its trade deficit widening and further weakening in construction and the manufacturing sector plateauing.  Panmure’s Chief Economist, Simon French, tells us that ‘this is not a desirable backdrop to increase interest rates, but the market is still pricing a 67% likelihood of a May hike.’

 

Here in the UK, L&G and Aviva posted sound numbers, as did G4S, with improving financial aid for Interserve’s beleaguered shareholders. But Rolls Royce grabbed the yellow jersey, with CEO Warren East posting underlying organic revenues +6%, pre-tax profit +25%, div flat. He expects RR to post mid-single-digit revenue growth in 2018, higher operating profits and free cash flow thanks to restructuring, 787 engine issues fixed by 2020. There will be redundancies as RR cuts its divisions down from five to two. In the wake of a difficult time under Sir John Rose and John Rishden, East has had the drains up and now the future looks bright with its share responding with an 8% increase on Tuesday, having initially risen by 13%. BT needs to be on its metal in the coming months as the government appears to be gunning for it to improve rural services. Finally, rumour has it that Melrose will raise its stakes above its £7.3 billion hostile bid, in its quest to capture GKN.

 

Chancellor Hammond will deliver his spring statement on Tuesday 13th March 2018. Expect little as the main Budget will be in the autumn. However, though the UK’S borrowing requirement will have dropped for the first time in 16 years, there is unlikely to be any signal to the end of the UK’s modest austerity programme, as it is still work in progress.  The opposition will scream for infrastructure spending.  Their cries are likely to fall on deaf ears.

 

 

UK companies posting results this week – Monday – Clarkson, Polymetal, Tuesday – Antofagasta, Cairn Energy, Fever-Tree, TP ICAP, Close Bros, Computercenter, Wednesday – Balfour Beatty, Hikma, Prudential, Wm Morrison, Marshalls, Dignity, Thursday – Old Mutual, Kier Group, Just Group, OneSavings, Phoenix Group, Savills, Friday – Mitie, JD Wetherspoon

 

 

 US companies posting results this week – Tuesday’s – Dick’s Sporting Goods, Thursday – Dollar General, Jabil Circuits, Friday – Tiffany’s

 

Economic data posted this week – Tuesday – US CPI, Wednesday – US PPI, Retail Sales, Thursday – US Import prices, Friday – US Housing data and Industrial Production, BOE Quarterly bulletin

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.

FURTHER MARKET UPDATE

 

 

It is 3.30pm and markets in London have only just over an hour to go. Certainly, London has done well to hold on to much of its gains in the FTSE 100 – +63 at 7179. However, the rest of Europe has surrendered a fair bit of its gains. I suspect the uncertainty that surrounds the Italian election and the unsatisfactory outcome of the German coalition results has left punters and investors a tad under-whelmed. As I scribe the DAX is only 36 to the good at 12127, having been up over 100 points.  The DOW, despite Trump’s ‘huffing and puffing’ over possible spurious negotiation with North Korea and a slightly calmer approach to an ill-thought-out trade war, has shown little enthusiasm to crack on – +20 at 24895, with the NASDAQ a little cheerier – +40 at 7371. Target ‘missed’ and its shares are down 4.15%.  Conversely UPS is 2% to the good.

 

Here in London as previously discussed banks and miners have led a qualified charge, providing much of the extra value. Of those companies that reported Intertek has done well +5.26%. Tesco and Morrison are the best performing supermarkets having shown the best sales growth through Kantar. Some of the rest must hang their heads in disappointment rather than shame – Just Eat -10.10.8%, Headlam -10.5%, and Aggreko -4.28% – an improvement having been down all but 9% near mid-day.  This market is hard to read as though volatility has been less violent in this session, there is a feeling it may not be all over. What seems to be accepted is that the economic basics have not changed.

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

MARKET UPDATE

 

Initially it was a very uncomfortable ride on global equity markets yesterday. The FTSE 100 started the session with its nose just above the Plimsoll line, though in response to the nebulous agreement with Merkel and the SDP in Germany and the shock Italian election results, which may produce an anti-EU coalition government, the DAX and MIB shed around 2% each.  During the morning the situation improved dramatically with the DAX finishing the session in positive territory and Italy’s MIB pairing losses but leaving the banking sector slightly battered. The FTSE 100 ended the session up 46 at 7115. The seismic movements in New York were even more pronounced than in Europe.  The DOW turned around 100+ point deficit to close over 300 points in positive territory, thanks in the main to concerns on a US trade war abating. Asia enjoyed a resurgence in terms of sentiment with the Hang Seng up 1.2% just before the close and the NIKKEI up just above 2%.

 

Certainly, for the moment, it is political machinations that are driving markets more than economic and financial fundamentals. This morning in London at 9.30am the BRC posted data that confirmed UK retail sales up 0.6% YoY on a like-for-like basis; 1.6% on a total sales basis. There was heavy discounting, which helped to hold up volumes but squeezing retailer margins, according to Panmure’s Chief Economist Simon French. Non-food sales showing signs of stabilising.

 

At 9.50 am the FTSE 100 was up 66 points at 7181. Banks (Barclays +2.2%, RBS +1%) and miners (BHP +2.2%) were in demand. There was a slew of earnings – Intertek +4%, SDL -2.24%. Investors and analysts vented their spleens on the sub-standard performances of Headlam -7.6%, Aggreko -9.75% and surprisingly JUST EAT – down 10.3%, having been down 15% early doors. Why? JUST EAT’S posted a LOSS of £76m, courtesy of £180m acquisition in Australia was not acceptable, despite revenues +45% to £546mn. Tesco rallied by 3% thanks to a positive note from Barclays. Smurfit Kappa rejected overtures from US’S International Paper. DOW futures look as though they will add 55 points at the opening.

WEEKLY FAYRE

WEEKLY FAYRE – Monday 4th March 2018

 

“Forward, the Light Brigade!”

Was there a man dismay’d?

Not tho’ the soldier knew

Some one had blunder’d:

Theirs not to make reply,

Theirs not to reason why,

Theirs but to do and die:

Into the valley of Death

Rode the six hundred.

 

Cannon to right of them,

Cannon to left of them,

Cannon in front of them

Volley’d and thunder’d;

Storm’d at with shot and shell,

Boldly they rode and well,

Into the jaws of Death,

Into the mouth of Hell

Rode the six hundred.

 

Flash’d all their sabres bare,

Flash’d as they turn’d in air

Sabring the gunners there,

Charging an army, while

All the world wonder’d:

Plunged in the battery-smoke

Right thro’ the line they broke;

Cossack and Russian

Reel’d from the sabre-stroke

Shatter’d and sunder’d.

Then they rode back, but not

Not the six hundred.

 

Cannon to right of them,

Cannon to left of them,

Cannon behind them

Volley’d and thunder’d;

Storm’d at with shot and shell,

While horse and hero fell,

They that had fought so well

Came thro’ the jaws of Death,

Back from the mouth of Hell,

All that was left of them,

Left of six hundred.

 

When can their glory fade?

O the wild charge they made!

All the world wonder’d.

Honor the charge they made!

Honor the Light Brigade,

Noble six hundred!”

 

 

Alfred, Lord Tennyson – poet – 1809-1892

 

 Considering that PM May was coming from a position of great weakness, with no working majority, I thought she acquitted herself very well with a decent honest and pragmatic speech.  Having taken an age to agree a policy with her fragmented Cabinet, I thought her attitude was conciliatory and fair. She is never going to please the hard-Brexiteers and the ‘Remainers’ so long as night follows day.  However, her main problem going forward, will be the EU. With Germany just able to form a coalition government, Italy likely to post a totally inconclusive result to the weekend’s election and rumblings in Greece, Poland and Hungary gathering momentum, the unelected bureaucrats from within the EU will be under orders to concede absolutely nothing in these negotiations. So, however reasonable Mrs May would like to be, I can see a ‘NO DEAL’ as a possible outcome. I sincerely hope not!  In closing I was very shocked that Messrs Major & Blair were not vehemently critical of Barnier’s disruptive comments regarding the UK’s constitution over Northern Ireland – Pretty disgraceful stuff, even though the French aristocrat tried to bluff his way out of his very undiplomatic comment by indicating it was just an option.

 

 At the end of the year, most global indices were at record levels or close to. Global growth was estimated to rise by 3.9% as articulated by the IMF’s Christine Lagarde, who in the same breath was contemptuous of the UK’S decision to leave the EU and how it would damage it irrevocably. By the middle of January equities were on fire thanks in the main, thanks to Trump tax mania. By 26th January doubts were beginning to set in. Erudite economists were starting to mutter inflation and higher interest rates in the US and eventually elsewhere. Most indices started to look very frothy and over-valued, despite US and European earning season posting more than adequate results.

 

A healthy correction was inevitable and so it transpired, aided and abetted by violent volatility with algorithm traders, the markets’ ‘spivs and vagabonds’ giving the market some measurable and very effective ‘welly.’ Most markets eased by 7-8% by mid-February and in the month of February as a whole, the following indices eased –

 

 

US markets in February stopped the longest bull run in US of 10 months since 1958 – DOW -4.28%, S&P -3.89%, NASDAQ -1.87% – Europe in February 2018 FTSE -4%, DAX -5.7%, CAC -2.9% – GLOBAL INDICES DOWN by an average of 3.7% last month.

 

GLOBAL MARKET MOVEMENTS LAST WEEK

 

 

INDEX 26/2/18 2/3/18 % gain/loss
FTSE 100 7244 7069 -2.4%
XETRA-DAX 12566 11913 -5.2%
CAC40 5343 5136 -3.9%
DJIA 25403 24538 -3.4%
S&P 500 2757 2691 -2.4%
NASDAQ 7373 7257 -1.6%
Hang Seng 31528 30583 -3.0%
Nikkei225 22134 21181 -4.3%
Shanghai Composite 3307 3254 -1.6%

 Apart from the fact that FED Chairman Jay Powell in his testimony told Congress that the US economy was in robust health and that the Fed would continue to raise interest rates, good news was in limited supply. Hence the market’s response to Powell’s news was a little negative with some risk being taken off the table.

 This coming week tells us that politics will attempt to be the market’s main ‘dramatis personae.’ Germany’s Merkel finally forms a coalition with the SDP. Italy’s election suggests an inconclusive populous result with the centre right parties (some anti-EU) likely to form a coalition with Matteo Salvini a possible PM.  President Trump’s threat to impose a 25% tariff on steel imports to the US became a reality last week – promised and delivered. It was met with anger and indignation. Not surprisingly shares in companies such as ArcelorMittal and ThyssenKrupp were affected negatively. China was for the time being not included in this act of trade warfare. The President, never short of a riposte, has threatened similar tariffs against EU car imports, if EU reacts adversely to steel tariff. PM May and other EU leaders have expressed their dismay. Trump has also met with resistance with the sale of guns with Walmart ceasing to sell certain weaponry as has Dick’s Sporting Goods.  American Outdoor Brands also said that sales of guns had dropped by 32% in the last year. China’s President Xi Jinping looks as though he will have his tenure extended.

 

The Street of Dreams was not a happy place to be last week. The week before last Walmart eased by 10% in a day after weak results with $25 billion wiped off it share value. Though JC Penney, Foot Locker and Abercrombie & Fitch are minnows in comparison, their results did not pass muster and investors vented their spleens on their respective share prices, taking them down by close to double digit percentages on the week. Nordstrom and Macy’s were the exceptions. Though their results were decent, they were hardly stellar. Is this on-line ailments?

 

There were deals in the making with Qualcomm and Broadcom on song to climb in to bed with each other, as are General Mills and Blue Buffalo due to do the same in an $8 billion deal. And, of course the ‘daddy of them all’ – Comcast usurping 21st Century and Walt Disney to buy Sky in a $31 billion deal. Whether Walt Disney cares to indulge in a bidding war remains to be seen – many doubt it. Certainly, UK regulators are likely to be more comfortable with a deal that precludes any Murdoch interest. It should not be forgotten that SKY and News Corp have been brilliant employers in the country, despite hacking misdemeanours. The NASDAQ lost less in value than other US indices last week, but on Friday, the likes of Apple, Alphabet, Facebook and Netflix all shed over 1% during the session.

 

Back here in Old Blighty, there was good news on the industrial front with factory output bouncing significantly in January. There was also a massive slew of earnings to consider and ruminate over. The market, after such an incredible surge in the last decade has become very unforgiving towards companies that fall short of profit expectations. Last week household names fell sharply in value when failing to pass muster with analysts and investors -Mothercare -15.4% on Friday, WPP -10% on Thursday, Carpetright -23%, ITV -10.4%, Moneysupermarket -8% and Capita continues its fall from grace -6.4%.

 

Conversely there was also good news for shareholders on deals, funding and improved profits and outlook – Sky +23.9%, Persimmon +8%, Cobham +12% on Thursday and Provident Financial +76%, admittedly from a very low base thanks to only £300million rights issue being required rather than £500 million. PF’S shares stood at £29 and change in June 2017. Toys R Us and Maplin went into administration with the likelihood that 5500 jobs will be lost. Investors will be looking over their shoulders with concern at House of Fraser, Debenhams, Kingfisher, N Brown and others. Can they adjust quickly enough to on-line requirements? Personally speaking, I fear for the ‘High Street’ in many places. Rent and business rates are slowly throttling retail on our high streets.

 

After 18 years the Sunday Times tells us that Equitable Life may hand out millions to pensioners. We hear that Interserve may require cash to bolster its balance sheet and finally it is rumoured that Rolls Royce’s CEO Warren East is preparing fresh cuts to bolster the profitability of this engineering giant.

UK companies posting results this week – Monday – Ultra Electronics, Tuesday – Intertek, IWG, Headlam, Just Eat, Aggreko, Rotork, Bodycote, SDL, Wednesday – Rolls Royce, Paddy Power Betfair, Page Group, eSure, CLS Holdings, DS Smith, Legal & General, Restaurant Group, Thursday – Aviva, Premier Oil, Countrywide, Domino Pizza, Spirent, International Game Technology, John Laing, G4S, Friday – Inmarsat. SIG, Eurocell

 

 

 US companies posting results this week – Monday – The Street, Tuesday – Target, Ciena, Urban Outfitters, Ross Stores, Autodesk, H&R Block, Medifast, Wednesday – Brown Forman, Abercrombie & Fitch, Costco, Thursday – L-Brands, Stage Stores, Vail Resorts, Christopher & Banks, Friday – Revlon, Big Lots

 

Economic data posted this week – Monday UK new car registrations and PMI Services, Tuesday – BRC Sales, US Factory Orders, Durable Goods, Non-Farm Productivity, Wednesday – Halifax House Prices, US ADP Employment Index, Friday – UK Trade Balance, UK Industrial production, UK NIESR GDP estimate, US Non-Farm Payrolls (+190k) and unemployment data (4.1%).

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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