Monthly Archives: October 2018

MARKET ACTIVITY & EUROPEAN OPENING CALLS 31/10/18

Yesterday FTSE 100 +9 at 7035 +0.14%, DAX -0.42% at 11287, CAC 40 +0.20% at 4978

 

BP doubled its net profit to $3.8 billion for last Q on higher oil prices +2.09%, Reckitt Benckiser -4.51%, Restaurant Group -17.29% (Wagamama bought by Frankie & Benny’s for £559m)

 

Stocks closed higher yesterday in NY as President Donald Trump intimated that the U.S. is ready to reach a deal to ease trade tensions with China, giving the market some much-needed relief. Conversely this follows CNBC’S Jim Cramer poignant comment about US stock markets made on Monday night – “Right now, the stock market is signalling that the economy’s in for pretty rapid deterioration, just like 2008,” Cramer said Monday night. “We have a Fed that’s lamentably unaware of the danger… the Fed is making the same mistakes as in 2007. They’re totally misjudging how weak some major parts of the economy are.” We shall see who is right!

 

In New York DJIA +431 at 24874 +1.77%, S&P 500 +1.58%, NASDAQ +1.58% (aided by a weaker Yen)

 

GE -8.29%, Coca-Cola +2.56%, Allergan -7.51%, eBay +2.24%

 

The measurable bounce in New York gave the impetus Asian markets required to bat on apart from Australia’s ASX -0.12% Shanghai +1.14%, Hang Seng +0.69%, Nikkei +1.79% –

 

Bonds – Japan 0.11%, Germany 0.38%, France 0.75%, UK 1.40%, Spain 1.56%, Portugal 1.87%, US 3.14%, Italy 3.49%, Greece 4.21%

 

Cable $1.2714, €/£0.8920, €/$1.1344, $/Y113.28 – Gold $1218.70 – Nymex $68.45, Brent $76.39 

UK companies posting results this week –Wednesday – Computacenter, Just Group, NEXT, Smurfit Kappa, Standard Chartered Bank, International Game Technology, Glaxo Smithkline, Thursday – Smith & Nephew, BT Group, Royal Dutch Shell, Centamin, Croda, Just Eat, Shire, Indivior, Lancashire Holdings, Friday – Millennium Copthorne, Paddy Power Betfair, TP ICAP

 

 

US companies posting results this week – Wednesday – Sprint, General Motors, Kellogg, Estee Lauder, Hyatt Hotels, Thursday – Apple, AIG, Kraft Heinz, Symantec, Pixelworks, Motorola Solutions, Friday – Chevron, Exxon Mobil, Metlife, AbbVie

 

 

Economic data posted this week – Wednesday – Gfk Consumer Confidence, BRC Price Index, US ADP Employment Index, Thursday – UK & US PMI Manufacturing, US ISM Manufacturing, BOE MPC, Friday – UK PMI Construction, US Factory Orders, Durable Goods & Trade Balance

 

Opening calls FTSE +65 points at 7100, DAX +121 points at 11408, CAC +40 at 5018, DJIA futures +103 points at 24977

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UK BANKS HAVE PROVED SUCH A DISAPPOINTING INVESTMENT!

UK BANKS HAVE PROVED SUCH A DISAPPOINTING INVESTMENT!

 

BANK 2/1/18 25/10/18 Percentage loss
LLOYDS BANKING 67.47p 57.72p -14.45%
BARCLAYS 203.2p 172p -15.35%
RBS 275.5p 222.70 -19.16%
HSBC 763p 609.40p -20.13%
STANDARD CHARTERED 704p 526p -25.28%

 

BANK 2/1/18 24/10/18 Percentage loss
WELLS FARGO $61.09 $51.86 -15.10%
CITIBANK $74.63 $64.97 -12.94%
JP MORGAN CHASE $110.93 $104.86 -5.47%
BANK OF AMERICA $29.90 $26.59 -11.07%

 

 

The UK banking crisis started a decade ago and yet, despite all the Central Bank and Government help, including massive dollops of QE imaginable, it continues to remain the most unloved sector for investors. The stench of mistrust and disenchantment remains as strong as ever. The angst has probably been exacerbated by the fact no one in authority from these financial institutions, responsible for the collapse of the banking market, has ever been brought to book or had to face charges in a court of law.

 

In fairness to the US, the FED and US Treasury did more to rehabilitate their banks quickly, regardless of the gargantuan cost that Lehman Bros, AIG, Bear Stearns, Washington Mutual, Merrill Lynch, Citibank and BOA, not forgetting for a moment, Freddie Mac and Fannie Mae, incurred.  Unsurprisingly the share prices of the main US banks – commercial and investment – have made a relatively strong recovery. Since the ‘lows’ of 2009, JPM Morgan is up 339%, Citibank +228%, Wells Fargo +475%, BOA +798% and Goldman Sachs +118%.  These are net figures and do not reflect the contribution made by TARP, the FED and latterly dividends. Relatively speaking, the gains made by UK banks since QE in March 2009 have been pitiful. Even investors in HSBC, Standard Chartered Bank and Barclays, which did not require taxpayer’ help, have failed to double their money in that period. 

 

Everyone from politician, to trade unionist to shop keeper were happy, with some justification, in vilifying the banks for their involvement in what Sir Vince Cable referred to disparagingly as “Casino Banking!” This is probably very fair in terms of the money lost by RBS, for its reckless purchase of ABN AMRO for £26 billion. This investment went up in a puff of smoke almost before the ink was dry from the relevant documentation. As to other ‘dramatis personae’, probably not so! It was poor credit analysis and injudicious lending that put the sector to the sword.  In the case of Barclays, it was Bob Diamond’s Barclays Capital which contributed between 40% and 60% of the bank’s profits, that went towards saving ‘The Bald-Eagle’s’ skin. Also, the £8 billion injection of capital from Qatar, whose validity will soon be challenged in the High Court, saved the taxpayer from being further involved in saving this bank. HSBC’s main problems were in the US, where their investment in Household cost their investors $56 billion. HSBC’S share price recovery has been sluggish to say the least.  Perhaps in the last 18 months, its wholesale commitment to China and Asia, has proved to be a problem, as China’s economy shows signs of slowing down, with international observers remaining concerned about the sector’s robustness.

 

This week three of the main banks posted results and trading updates – Barclays on Wednesday, Lloyds Banking Group on Thursday and RBS today.  PPI claims has been very damaging – £30 billion +. Lloyds Banking has been easily the greatest offender, having so far paid back £18 billion to customers. No one, as far as I can remember, ever legislated for this kind of cost. Perhaps these claims are close to finishing (29th August 2019)? We shall see. However, Thursday’s numbers from Lloyds were good – a profit slightly down on last year of £1.8 billion for the last quarter but beating expectations. Tier One Capital was very solid at 15.5% and what was hugely encouraging was there were no provisions for PPI claims in their set of numbers. The problem with Lloyds is that its business is entirely domestically orientated, and it faces severe competition from prime mortgage business.  Less mortgages are being applied for.  Also, there are non-believers in the strength of the UK economy for the next couple of years and those facts could keep the lid on any possible explosion of the share price.

 

Barclays posted numbers on Wednesday against a background of hostile shareholder interference from Sherborne’s Edward Bramson, who bought a 7% stake in the bank at around 200p. He would appear unhappy with Jes Staley’s leadership, as well as Barclays business plan, which would probably include breaking up commercial banking from investment banking. This would be folly, after such a shrewd move in buying the remnants of Lehman in New York. This has proved very profitable.  However, I fear Mr. Bramson may have bitten off more than he can chew! Barclays is the only UK bank with investment banking presence and it is a vital and an intricate part of the bank’s DNA of success. Barclays posted profits up from £1.1 billion last year for the same quarter to £1.5 billion. The relevant point was that investment banking profits increased from £627 million to £688 million. Shares bounced 4.94% on the day. 

 

This morning (Friday) Royal Bank of Scotland posted a pre-tax profit for the last quarter of £961 million. Tier One Capital was good at 16.7%. There was a £389m provision for conduct and litigation costs. There were modest concerns that RBS’S margins were rather narrow at 1.93% compared to Lloyds’s 2.9%. However, the sale of the taxpayers 62.3% of RBS back in to private ownership still looks rather futuristic, unless the Treasury/Chancellor decide to take a loss on the chin. 503p is the breakeven price and RBS’S current share price is 222.70p. At least RBS has all but settled its $4.9 billion fine with the US Department of Justice for indiscretions in selling mortgage backed securities. The balance sheet looks cleaner and maybe there is a case for withdrawing the name of RBS, changing to NatWest south of Hadrian’s Wall.

 

Certainly, I am not the only person to be concerned about RBS’S Global Restructuring Group (GRG). Even though the regulator is less than convinced that RBS has a case to answer, could there be possibly be some civil action taken against the bank for irresponsible behavior towards SMES undergoing difficulties just post the credit crisis?

 

HSBC and Standard Chartered Bank report next Monday and Wednesday respectively.  Their share prices are much more driven by activity in China, Asia and Africa. Hence to expect to much from HSBC’S interim numbers with economic uncertainty prevailing in China, might be folly. Standard Chartered Bank’s CEO Bill Winters continues to radically restructure the bank.

 

The performance of banking shares has certainly been very disappointing in comparison to its US peers, apart from this year.  The cost of regulation is now huge and surely reflects their share prices. Let’s hope banks regain some respect from the public. If, and when that happens, the change in mood will rub off on investors. An improvement in the UK economy and some clarity of BREXIT will also be viewed as positive developments. 

David Buik

Communications

Mobile – 07788 144 877

 

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MARKET ACTIVITY & OPENING CALLS FOR EUROPE 26/10/18

OCTOBER IS A NOTORIOUSLY BAD MONTH FOR EQUITIES. Yesterday equity markets experience the classic dead cat bounce, starting in Europe and carrying on in New York with gay abandon! The colour ‘RED’ was for a short time almost an endangered species!

 

 

Yesterday FTSE 100 pushed back through the 7k barrier – 7,004.10 +41.12 (0.59%), DAX +115 at 11307 -+1.03%, CAC 40 +79 at 5032 +1.60% –

 

Lloyds Banking Group +1.87% (profit of £1.8 billion no provision for PPI), WPP -16.02%, Debenhams -2% (loss of £491.5 million 4k jobs to go and 50 units to close), Patisserie Valerie desperate disclosures

 

 

 

In New York markets bounced back sharply initially with the DJIA +401 points +1.63% at 24984, S&P 500 +1.86%, NASDAQ +2.95 % –

 

However, after hours Amazon disappointed its acolytes with revenue and guidance numbers – Revenues fell short of expectations for the recent trading period – $56.6 billion vs. $57.10 billion estimated.

 

 Its fourth-quarter operating income guidance of $2.1 billion to $3.6 billion was also below Street expectations of $3.9 billion – Companies that posted results yesterday –

Merck -0.82%, CME -1.99%, Raytheon -3.07%, Intel +4.46%, Snap +6.07%, Amazon -7.42% at $1650, Alphabet +4.4% but after hours -3.95%), Twitter +15.47%

Unfortunately, after a great bear squeeze rally recovery in New York, US futures went in to reverse after Amazon’s disappointing numbers and subsequently Asia caught another chill – ASX -0.45%, Shanghai -0.58%, Hang Seng -1.41% %, Nikkei -0.92%.

 

Bonds – Japan 0.11%, Germany 0.40%, France 0.77%, UK 1.44%, Spain 1.58%, Portugal 1.97%, US 3.14%, Italy 3.50%, Greece 4.19%

 

Cable $1.2815, €/£0.8865, €/$1.1364, $/Y112.15 – Gold $1234.60 – Nymex $66.73, Brent $76.42 –

 

UK companies posting results this week – Friday – IAG, RBS

 

 

US companies posting results this week –, Friday – Zimmer, Colgate-Palmolive

 

Economic data posted this week – Friday – US GDP 3rd quarter estimate

 Though there is no evidence to suggest that the correction/pull-back is over, bargain hunters will be on the alert to scoop up cheap offers of stock!

 

Opening calls FTSE -80 points at 6924, DAX -157 points at 11150, CAC -60 points at 4972, DJIA -296 futures points at 24690

 

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MARKET ACTIVITY & EUROPEAN OPENING CALLS

 

 

A toxic Cocktail of risks hit markets

EC give Rome three weeks to revise 2019 budget

Italian budget, Brexit, Khashoggi death and nuclear worries weigh on markets

Asian shares on brink of bear market

FTSE slid to 7 month low!

 

FTSE 100 -87 at 6955, DAX -250 at 11274 -2.17%, CAC 40 -85 at 4967 -1.69% – Paddy Power -4%, Cairn Energy -6% – NMC Health +8% – Anglo American -2.48%, Whitbread -1.52% GSK +0.23%

 

DJIA -0.50% -126 at 25191, S&P 500 -0.55%, NASDAQ -0.42% –The DJIA had been down by as many as 548 points at its low of the session.

 

McDonald’s +6.3%, Caterpillar -7.7% incurring significantly greater costs – Lockheed Martin -1.66% but has enjoyed a reasonable run since July

 

 

There was modest evidence of an untrustworthy bear squeeze rally in Asia – ASX -0.04%, Shanghai +1.53%, Hang Seng +0.95%, Nikkei +0.49%.

 

Bonds – Japan 0.15%, Germany 0.42%, France 0.79%, UK 1.48%, Spain 1.66%, Portugal 2.00%, US 3.17%, Italy 3.60%, Greece 4.26%

 

Cable $1.2983, €/£0.8831, €/$1.1470, $/Y112.57 – Gold $1234.80 – Nymex $66.63, Brent $76.78 – Oil settles 4% lower as traders focus on Saudi pledge to play ‘responsible role’ in market

 

UK companies posting results this week – Wednesday – Antofagasta, Fresnillo, Barclays Bank, Metro Bank, Stobart Group, Thursday – Debenhams, Elementis, Evraz, Relx, Hastings Group, Kaz Minerals, WPP, Lloyds Banking Group, Friday – IAG, RBS

 

 

US companies posting results this week – Wednesday – Boston Scientific, AT&T, General Dynamics, Freeport-McMoRan, Boeing, Xilinx, Visa, Ford, Microsoft, Thursday – Biogen, Merck, Whirlpool, CME, Altria, Raytheon, Valero Energy, KKR, Bristol Myers Squibb, Conoco-Phillips, Intel, Snap, Mattel, Amazon, Alphabet, Twitter, Friday – Zimmer, Colgate-Palmolive

 

Economic data posted this week – Wednesday – UK housing loans, US PMI survey, US New Home Sales, US Beige Book, Thursday – US Wholesale inventories and Durable Goods, ECB Decision, Friday – US GDP 3rd quarter estimate

 

 

Opening calls FTSE +65 points at 2020, DAX +150 points at 11424, CAC +50 points at 5017, DJIA futures +86 points at 25275

 

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MARKET ACTIVITY & EUROPEAN OPENING CALLS

Political unrest seems to be dominating investors’ agenda, with PM May hanging on by her fingernails in attempting to deliver BREXT, President Trump raising the temperature with Russia by threatening to cancel the 31-year old nuclear proliferation deal and the ripples of concern from the appalling murder of Jamal Khoshoggi by Saudi Arabia in Istanbul.

 

Yesterday – FTSE 100 -7 at 7042, DAX -29 at 11524 -0.26%, CAC 40 -31 at 5053 -0.62% – Paddy Power -4%, Cairn Energy -6% – NMC Health +8% – BREXIT requires some clarity. Mrs May in a parlous state.

 

DJIA -0.50% -126 at 25317, S&P 500 -0.43%, NASDAQ -0.26% – DJIA drops 200 points on earnings concerns and geopolitical spat – US/Russia, but rallied off its ‘lows’ for the day towards the close – Halliburton -3.04%, HASBRO -3.09%, Kimberley-Clark -3.48%

 

 

This morning in Asia investors have turned tail, after yesterday’s massive rally in China thanks to an increase in global tensions – US/Russia, US/China trade spat – fear of oil price increase with possible sanctions against Saudi Arabia – ASX-0.89%, Shanghai -1.37%, Hang Seng -2.34%, Nikkei -2.28%.

 

Bonds – Japan 0.16%, Germany 0.44%, France 0.82%, UK 1.52%, Spain 1.69%, Portugal 2.00%, US 3.19%, Italy 3.52%, Greece 4.28%

 

Cable $1.2958, €/£0.8836, €/$1.1453, $/Y112.49 – Gold $1226.50 – Nymex $69.26, Brent – $79.61 

 

UK companies posting results this week – Tuesday – Anglo-American, Bunzl, Plus500, St James’s Place, Travis Perkins, Whitbread, Glaxo Smithkline, Wednesday – Antofagasta, Fresnillo, Barclays Bank, Metro Bank, Stobart Group, Thursday – Debenhams, Elementis, Evraz, Relx, Hastings Group, Kaz Minerals, WPP, Lloyds Banking Group, Friday – IAG, RBS

 

 

US companies posting results this week – Tuesday – Corning, United Technologies, Pulte, Harley-Davidson, £Ms, JetBlue, McDonald’s, Caterpillar, Lockheed Martin, Wednesday – Boston Scientific, AT&T, General Dynamics, Freeport-McMoRan, Boeing, Xilinx, Visa, Ford, Microsoft, Thursday – Biogen, Merck, Whirlpool, CME, Altria, Raytheon, Valero Energy, KKR, Bristol Myers Squibb, Conoco-Phillips, Intel, Snap, Mattel, Amazon, Alphabet, Twitter, Friday – Zimmer, Colgate-Palmolive

 

Economic data posted this week – Tuesday – CBI Industrial trends survey, Wednesday – UK housing loans, US PMI survey, US New Home Sales, US Beige Book, Thursday – US Wholesale inventories and Durable Goods, ECB Decision, Friday – US GDP 3rd quarter estimate

 

 

Opening calls FTSE -39 points at 7003, DAX -100 points at 11427, CAC -25 points at 5028, DJIA futures -194 points at 25123

 

75% of retail investors lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

MARKET ACTIVITY & OPENING CALLS

 

INDEX 15/10/18 19/10/18  % gain/loss  
FTSE 100 6995 7049 +0.77%  
XETRA-DAX 11523 11553 +0.26%  
CAC40 5095 5084 +0.22%  
DJIA 25332 25444 +0.44%  
 S&P 500 2763 2767 +0.14%  
NASDAQ 7473 7449 -0.32%  
Hang Seng 25401 25561 +0.63%  
Nikkei 22501 22532 +0.14%  
Shanghai Comp 2605 2550 -2.11%  

 

 

 

Last week global gains were modest apart from Shanghai down 2.1% and the NASDAQ easier by 0.32%. The first half of last week, markets witnessed a bit of a rally, thanks to a combination of a ‘dead-cat-bounce’ and a very upbeat start to the US 3rd quarter earnings with the five main banks, JP Morgan, Wells Fargo, Citibank, Morgan Stanley and Goldman Sachs in full cry, posting increased profits varying from 19% to 33%, courtesy of the Trump tax cuts. Towards the end of last week markets started to run out of steam as concerns about a global slowdown, humungous debt, inflation, the threat of increased rates in US and Trump’s trade spat with China, started reappearing venomously on investors’ agenda.

 

 

This morning in Asia investors have witnessed a significant bounce in most of their bourses – clearly investors felt these markets had been oversold – ASX-0.45%, Shanghai +4.17%, Hang Seng +2.33%, Nikkei +0.54%.

 

Bonds – Japan 0.15%, Germany 0.44%, France 0.83%, UK 1.57%, Spain 1.72%, Portugal 2.01%, US 3.20%, Italy 3.57%, Greece 4.31%

 

Cable $1.3071, €/£0.8807, €/$1.1512, $/Y112.59 – Gold $1230.90 – Nymex $69.38, Brent – $79.69 

 

UK companies posting results this week – Monday – Petra Diamonds, Tuesday – Anglo-American, Bunzl, Plus500, St James’s Place, Travis Perkins, Whitbread, Glaxo Smithkline, Wednesday – Antofagasta, Fresnillo, Barclays Bank, Metro Bank, Stobart Group, Thursday – Debenhams, Elementis, Evraz, Relx, Hastings Group, Kaz Minerals, WPP, Lloyds Banking Group, Friday – IAG, RBS

 

 

US companies posting results this week – Monday – Halliburton, Kimberley-Clark, HASBRO, Tuesday – Corning, United Technologies, Pulte, Harley-Davidson, £Ms, JetBlue, McDonald’s, Caterpillar, Lockheed Martin, Wednesday – Boston Scientific, AT&T, General Dynamics, Freeport-McMoRan, Boeing, Xilinx, Visa, Ford, Microsoft, Thursday – Biogen, Merck, Whirlpool, CME, Altria, Raytheon, Valero Energy, KKR, Bristol Myers Squibb, Conoco-Phillips, Intel, Snap, Mattel, Amazon, Alphabet, Twitter, Friday – Zimmer, Colgate-Palmolive

 

Economic data posted this week – Tuesday – CBI Industrial trends survey, Wednesday – UK housing loans, US PMI survey, US New Home Sales, US Beige Book, Thursday – US Wholesale inventories and Durable Goods, ECB Decision, Friday – US GDP 3rd quarter estimate

 

 

Opening calls FTSE +10 points at 7059, DAX +17 points at 11580, CAC +6 points at 5091, DJIA futures +35 points at 25479

 

75% of retail investors lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

WEEKLY FAYRE

TODAY’S FAYRE – Monday, 22nd October 2018

 

“Once more unto the breach, dear friends, once more;

Or close the wall up with our English dead.

In peace there’s nothing so becomes a man

As modest stillness and humility:

But when the blast of war blows in our ears,

Then imitate the action of the tiger;

Stiffen the sinews, summon up the blood,

Disguise fair nature with hard-favour’d rage;

Then lend the eye a terrible aspect;

Let pry through the portage of the head

Like the brass cannon; let the brow o’erwhelm it

As fearfully as doth a galled rock

O’erhang and jutty his confounded base,

Swill’d with the wild and wasteful ocean.

Now set the teeth and stretch the nostril wide,

Hold hard the breath and bend up every spirit

To his full height. On, on, you noblest English.

Whose blood is fet from fathers of war-proof!

Fathers that, like so many Alexanders,

Have in these parts from morn till even fought

And sheathed their swords for lack of argument:

Dishonour not your mothers; now attest

That those whom you call’d fathers did beget you.

Be copy now to men of grosser blood,

And teach them how to war. And you, good yeoman,

Whose limbs were made in England, show us here

The mettle of your pasture; let us swear

That you are worth your breeding; which I doubt not;

For there is none of you so mean and base,

That hath not noble lustre in your eyes.

I see you stand like greyhounds in the slips,

Straining upon the start. The game’s afoot:

Follow your spirit, and upon this charge

Cry ‘God for Harry, England, and Saint George!”

 

William Shakespeare – Playwright & poet – 1564-1616

 

Though I was not able to go to Ascot for Champions Day on Saturday, I did manage to watch the recorded fayre. It was as good a day’s racing as could be served up at one meeting. Outstanding performances by ‘Stradivarius’ in the stayers, ‘Roaring Lion’ in the Queen Elizabeth and ‘Cracksman’ in the Champion Stakes gave John Gosden an amazing three-timer. All three put in amazing performances. ‘Stradivarius’ has won all five of his starts this year and is the first ‘Gold Cup’ winner to win the stayers’ race from this fixture in fifty years.  

 

It will be interesting to see how the US, UK and other close allies respond to the skulduggery in Saudi Arabia’s consulate in Istanbul. It appears that the Kingdom has admitted that there was a fracas in the building which probably cost Jamal Khoshoggi his life. Dollar and Pound signs seem to have triggered rather muted comments from President Trump, but it is early days!  However, it was good to see a joint statement – strong in its content – from the UK, Germany and France – deploring this action. Will there be sanctions, when the drains have been pulled up?

 

INDEX 15/10/18 19/10/18  % gain/loss  
FTSE 100 6995 7049 +0.77%  
XETRA-DAX 11523 11553 +0.26%  
CAC40 5095 5084 +0.22%  
DJIA 25332 25444 +0.44%  
 S&P 500 2763 2767 +0.14%  
NASDAQ 7473 7449 -0.32%  
Hang Seng 25401 25561 +0.63%  
Nikkei 22501 22532 +0.14%  
Shanghai Comp 2605 2550 -2.11%  

 

 

 

The week before last was an unnerving trading period, even for the most battle-hardened traders and market observers. However, during the first half of last week, markets witnessed a bit of a rally, thanks to a combination of a ‘dead-cat-bounce’ and a very upbeat start to the US 3rd quarter earnings, with the five main banks, JP Morgan, Wells Fargo, Citibank, Morgan Stanley and Goldman Sachs in full cry, posting increased profits varying from 19% to 33%, courtesy of the Trump tax cuts. Towards the end of last week markets started to run out of steam as concerns about a global slowdown, humungous debt, inflation, the threat of increased rates in US and Trump’s trade spat with China, started reappearing on investors’ agenda, with monotonous regularity.

 

So, what was looking like quite a decent week for equities turned out to be quite a modest effort. The Shanghai Composite shed 2.11% in value last week, despite posting a 2.58% gain on Friday, with another 4% added this morning. China’s main index has shed a worrying 23.8% up to last Friday since the beginning of the year. Thursday saw China post a year to date GDP of 6.5%, slightly below expectations of 6.6%. It has fallen from 10% a decade ago. Concern prevails over the robustness of its banking sector and the fact that so many business properties are not being utilised. Export figures have yet to be affected by US sanctions and were up 14.8% from 9.8% up in July and imports were up 14.3%.

 

 

Banking was not the only sector to produce decent earnings last week. Netflix, having recently been the subject of a downgrade, produced some stellar numbers on increased membership – up 2 million for the last quarter. There were also eye-catching performances from UnitedHealth and Johnson & Johnson. May of us will be watching Facebook’s share price next week – not I hasten to add on news of its results – but the surprising appointment of Sir Nick Clegg as its Communications aficionado. The lure of filthy lucre has great attractions. Uber served notice that intends to stage an IPO in early 2019, subject to market conditions, which could value this global phenomenon at about $120 billion.

 

Back here in London, the FTSE 100 just about kept its nose clean. The mining sector had a small renaissance and despite oil threatening to fall below $80 a barrel, BP and Shell near enough held it together. However, if sanctions are taken out on Saudi Arabia, which produces 7 million barrels of oil a day, for their adverse political behaviour, this price lull could come to a rapid end. Unilever posted adequate numbers with sales up about 2.4% for the last quarter. CEO Paul Polman showed not the slightest bit of contrition for irritating shareholders in his quest to have Unilever’s head office removed from London for Rotterdam.  This initiative never had a chance.

 

Some of the UK’s economic data posted last week was encouraging.  Inflation dropped to 2.5% with wage inflation rising to 3.1%. However, not unexpectedly retail sales were disappointing – down last month by 0.8% and on an annualised basis easier from 3.4% to 3%. Sales were particularly robust in the summer, thanks to the amazing weather. So, it was hardly surprising that the retail therapists were reluctant to hit the high street in their droves for winter clothing with the sun still siting relatively high on the yardarm for the time of year.

 

Debenhams’ results will be closely scrutinised on Thursday.  The runes in the sand do not look good. Expect a dividend cut and the closure of some outlets as the hedge funds circle like vultures to scoop up any reasonable looking assets in the event of their bankers and shareholders losing patience. It looks as though Intu’s property (shops) operation may be sold to Brookfield Property and Saudi Arabia’s Olyan Group for £2.9 billion. Intu shares jumped 12% on Friday. Most of the UK banks post results this week and will be the focus of investors’ attention this week.  To date this year, they have proved to be very poor value – Barclays down 19.7%, Lloyds -16.8% and RBS -15.01%! Let’s hope the news is a little more cheering.  LSE has increased its stake in LCH, which coincided with a warning from the US that messing with the current system out of a fit of political pique could have unattractive consequences for clearing in Europe. Interesting to see if the EU heed the notice!

 

Next week is a huge week for US earnings (See below).  By Friday we should have a very reasonable idea as to whether the US economy is as robust as FED Chairman Jay Powell says it is. Chancellor Hammond presents the Budget on Monday week – 29th October. It does not look like he has much room to manoeuvre. However, he needs to dispel the rumour that austerity will be over in two years, with positive news on housing – building more, by forcing councils to release the land.  The Government also needs to deal with social service issues.  Otherwise the Conservatives will be ‘toast’ in a quickly held General Election, post the universally held views that negotiations on BREXIT have been disastrous. 

 

UK companies posting results this week – Monday – Petra Diamonds, Tuesday – Anglo-American, Bunzl, Plus500, St James’s Place, Travis Perkins, Whitbread, Glaxo Smithkline, Wednesday – Antofagasta, Fresnillo, Barclays Bank, Metro Bank, Stobart Group, Thursday – Debenhams, Elementis, Evraz, Relx, Hastings Group, Kaz Minerals, WPP, Lloyds Banking Group, Friday – IAG, RBS

 

US companies posting results this week – Monday – Halliburton, Kimberley-Clark, HASBRO, Tuesday – Corning, United Technologies, Pulte, Harley-Davidson, £Ms, JetBlue, McDonald’s, Caterpillar, Lockheed Martin, Wednesday – Boston Scientific, AT&T, General Dynamics, Freeport-McMoRan, Boeing, Xilinx, Visa, Ford, Microsoft, Thursday – Biogen, Merck, Whirlpool, CME, Altria, Raytheon, Valero Energy, KKR, Bristol Myers Squibb, Conoco-Phillips, Intel, Snap, Mattel, Amazon, Alphabet, Twitter, Friday – Zimmer, Colgate-Palmolive

 

Economic data posted this week – Tuesday – CBI Industrial trends survey, Wednesday – UK housing loans, US PMI survey, US New Home Sales, US Beige Book, Thursday – US Wholesale inventories and Durable Goods, ECB Decision, Friday – US GDP 3rd quarter estimate

 

David Buik

Communications

Mobile – 07788 144 877

 

Financial spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Click here to read the full risk warning.

MARKET ACTIVITY & EUROPEAN OPENING CALLS – 19/10/18

These EU/UK negotiations seem to have got bogged down. There is either a language barrier. Does ‘Chequers’ work – YES or NO! If Mrs May is deaf, tell her again and try something else like Canada + and or WTA. Question to EU – Do you want to negotiate?  If not, let’s just get on with our lives! Indecision and lack of clarity could become unnecessarily dangerous!

Yesterday FTSE 100 7,026.99 −27.61 (0.39%, DAX 11,589.21 −125.82 (1.07%), CAC 5,116.79 −28.15 (0.55%) – UK Retail sales -0.8% up 3% from 3.4% YTD – Concern over BREXIT negotiations

UNILEVER -1.71% sales up 2.4% in last quarter, with CEO Paul Polman showing no remorse over his spat with shareholders over repatriation plans for Rotterdam rejected out of hand, NATIONAL EXPRESS +5.96%

Investors vented their spleens on the Street of Dreams taking some more risk off the table. DJIA -1.27% -373 points at 25379, S&P 500 -1.44%, NASDAQ –2.06% with the Dow Jones Industrial Average off more than 400 points at its lows, on worries about global growth and as investors continued to weigh minutes of the Federal Reserve’s September meeting.

ADP EMPLOYMENT INDEX +230k in September – Bank of New York, Mellon -0.54%, Travelers -1.09%, Snap-On -0.57%, PayPal -3.26%, American Express-1.44%, Phillip Morris +3.43%,

This morning in Asia – ASX -0.17%, Shanghai -0.02%, Hang Seng -0.39%, Nikkei -1.22%. China bounces back a smidgen despite marginally disappointing GDP numbers

 

Bonds – Japan 0.14%, Germany 0.46%, France 0.83%, UK 1.59%, Spain 1.64%, Portugal 1.94%, US 3.17%, Italy 3.58%, Greece 4.28%

 

Cable $1.3021, €/£0.8798, €/$1.1457, $/Y112.38 – Gold $1230.40 – Nymex $68.76, Brent $79.45 

 

UK companies posting results this week –Friday – Lloyds of London, Intercontinental Hotels, Provident Financial, Acacia Mining

 

 

US companies posting results this week –Friday – Procter & Gamble

 

Economic data posted this week – Friday – UK PSBR, BOE Carney Speech, US Existing Home Sales

 

 

Opening calls FTSE +20 at 7046, DAX -32 at 11566, CAC -14 at 5102, DJIA futures +50 at 25429

 

75% of retail investors lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.

POPULISM HAS SQUARED-UP TO DEMOCRACY HEAD-ON!

“POPULISM HAS TAKEN A VICE-LIKE GRIP IN REPLACING DEMOCRACY! – PRENEZ-GARDE!

 

I have just finished Edward Luce’s book – ‘The Retreat of Western Liberalism.’ The title sounds rather intellectual and erudite. However, it is a riveting, illuminating and rather frightening read. In plain language, what he is telling the reader is that democracy and liberalism are dying on their feet and have in the last 25 years been replaced by populism! When one thinks about that title, I think that has been very self-evidence by what has happened in the US in the last three years, where Trump has turned out to be a highly effective standard bearer for populism even though his personal ratings across America are ‘low.’ What the likes of Messrs Blair, Clinton, Bush and more recently Obama and Cameron have failed to grasp is ‘why’ and ‘how’ the establishment has become less acceptable and in places is being consistently rejected. It is interesting to note that at the last Presidential Election 91% of Washington voted for ‘Hillaryland!’ Washington is a city of government and is the epitome of a crumbling ‘establishment.’ Yet the Mid-West, the Bible-belt and the US’S industrial heartland saw Donald J Trump all the way to 1600, Pennsylvania Avenue, Washington, DC, despite Mrs Rodham-Clinton winning the popular vote. They wanted change and my word they have it in spades.

 

It appears that Theresa May has also failed to grasp a similar nettle that the U.K. electorate is equally fed up with the establishment and even though Labour could be financially disastrous for the U.K, a significant number of voters aged between 18-50years of age are prepared to pay the price for change to find out. Let’s face the surprising decision made by the UK electorate to leave the EU had little to do with trade and more to do with the disenchantment of the ‘establishment’ and in many parts of the North a major concern about immigration! The UK’S balance sheet only seemed to play a ‘spear-carrying’ role.

 

In all fairness the popularity of democracy has been on the wane since the fall of the Berlin Wall in 1989. Another bit of data that is worthy of mention is the fact that there is not one democratic country on the African continent. India has been a text book example of the democratic process, but many will be amazed if the status quo will remain so in a decade’s time.

 

In this book Luce refers to President Trump’s contempt for China’s President Xi Jinping and his inability to understand or show any sympathy for his problems. Luce believes that President Trump could lead the US into a war with China due to his belligerent attitude. He also would not rule out the possibility of the mother and father of all conflicts between the US and the Middle East. We should not forget that at the time of the Cold War there were 5 nuclear powers. There are now nine, with India, Pakistan, Israel and North Korea added to the club, with Iran waiting in the wings.

 

Trump quietly respects Russia’s Putin. Angela Merkel is the only world-class leader in Europe, but she is unpopular in her fourth term, having just yielded some vitally important support in recent local elections. If she fails to improve relations not only with Russia, but also with dissenting members of the EU, such as Italy, Greece, Poland and Hungary, her ‘sacred cow’ or club will start to break-up, following in the footsteps of the U.K.!

 

Blame for the continued fragmentation of liberalism and democracy must also be levelled at Barack Obama for failing to engage with Russia, China and Congress during his two administrations, leaving the west vulnerable to Russia’s and China’s increasing military strength.

 

To add fuel to the explosion of populism’s firebrand behaviour, there is no doubt that the banking crisis of 2008/9 seriously turned many liberal minded people into supporters of populism, since no one in any authority in these offending banks and other members of the financial sector on both sides of the Pond, went to jail for criminal activity.

 

Many now believe that, despite his falling popularity within the liberal and democratic community, President Trump will win the mid-term elections in November and if Mrs May does not pull a few rabbits out of the hat, Jeremy Corbyn will be on his way to Downing Street post the next General Election.

 

Two other major issues were pointed out by Edward Luce in his excellent book. He was totally underwhelmed by the DAVOS WORLD ECONOMIC FORUM. He felt that as a major political or business jamboree, it was a complete waste of time. Most of the main speakers were windbags who were very fond of their own voices (he did not say that; it’s my interpretation). Until the WEF starts listening to the needs of the world instead of telling them what they expect from the world of business and commerce, the delegates and politicians would just continue to waste millions of dollars on a useless event for their own self-edification.

 

Finally, technology may well provide the most innovative development of the modern age. However, no contingency plans have been made to deal with its effect on employment and business and most important of all, the damage technological crime could have on world security and its survival. There is no doubt that Russia and China are dangerously ahead of the game with the west languishing in their wake in terms of effectiveness. In August this year the Bank of England’s chief economist Andy Haldane gave the most brilliant speech to the Guild Society at Oxford University flagging up the dangers that artificial intelligence and machines that have the potential to make a huge number of jobs obsolete, with thousands of UK workers facing unemployment due to new technology.

 

Mr Haldane said the “Fourth Industrial Revolution” would be on a “much greater scale” than the previous three, and said the UK will need a skills revolution to avoid unemployment on a mass scale. He said that previous industrial revolutions had “a wrenching and lengthy impact on the jobs market, on the lives and livelihoods of large swathes of society”. He went on to say;

 

“Jobs were effectively taken by machines of various types, there was a hollowing out of the jobs market, and that left a lot of people for a lengthy period out of work and struggling to make a living” heightening social tensions.

 

Also, within that space the spending on robots is seen rising to $67 billion by 2025 from an estimated $25 billion this year, according to Boston Consulting. Most of that spending is expected to be done by four industries—computer, electrical, transportation and machinery. The countries buying most of these robots will be those with higher labour costs. including South Korea, Japan, the U.S. and Germany. China is also a rapid adopter.

 

In closing, suffice to say that social media is playing a massive role in shaping ideological political thinking. Whether much of this change in mood has any merit in it, is probably irrelevant. The fact remains social media is hugely influential. You only need to remember how effective Labour’s visceral ‘Momentum’ social media campaign was at the last General Election in June 2017. I wanted to share some of Edward Luce’s comments and from his ‘thought-provoking’ book to your attention. You may well be more than aware of some of the pitfalls of life.  There is a powerful message for those politicians, who believe in the democratic process – “START LISTENING TO THOSE, WHO CAST THEIR VOTE AT THE BALLOT BOX, RATHER THAN JUST PAYING LIP-SERVICE IN LECTURING TO THEM.” If not, rest assured the world looks as if it will become an increasingly dangerous place to bring children up in!

 

David Buik

Communications

Mobile – 07788 144 877

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Financial spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Click here to read the full risk warning.

Market Activity & European opening calls 18/10/18

Hello again everyone!  It is Thursday 18th October 2018. I am David Buik of Core Spreads bringing you an update on market activity in London, Europe, the Street of Dreams in New York and Asia, culminating with the opening calls for the main European bourses.

 

There was nothing cheer about from the EU/UK BREXIT negotiations in Brussels.  The talks appear to have hit deadlock with the PM rumoured to have held out an olive branch by way of extending the transition period for another year to 2020 in an attempt to avoid a ‘NO DEAL SITUATION!” Few in the UK will welcome this idea. Mrs May appears to have no power base at present, which has resulted in no flexibility from the EU

Yesterday FTSE 100 -4 at 7054, DAX -0.52%, CAC -0.54% – Inflation – Britain’s top stock index turned tail on Wednesday, tracking European shares lower as airlines took a dive and slumping crude prices dragged on oil majors. EasyJet suffered the biggest fall on the FTSE 100, down 5.1 percent amid a broader selloff in airlines.

Traders pointed to a profit warning from Flybe which sent that stock down 40 percent, and more gloomy forecasts from Ryanair CEO Michael O’Leary who said a hard Brexit could ground UK flights for up to three weeks.

Tour operator TUI fell 3.2 percent while mid-cap peer Thomas Cook tumbled 7.7 percent.

ASOS +16.8% at 5844p, PEARSON +2.8% at 838p

Inflation fell to 2.4%, from 2.7%, which was largely driven by lower prices for food and non-alcoholic drinks. Wage inflation at 3.1% is an encouraging sign for the UK economy

The Consumer Prices Index figure surprised economists who had been expecting inflation to fall to 2.6%.

 

 

DJIA -0.36% a5 25706, S&P 500 -0.03%, NASDAQ -0.04% – 3 indices took stock after Tuesday’s massive gains thanks to early stellar 3rd quarter earnings. However, FED minutes point to rate hikes

ALCOA +3% despite an expected drop in earnings, ABBOTT LABS -1% and NETFLIX added over 5% after hours on Tuesday with 2 million more subscribers added –

 

This morning in Asia – ASX -0.13%, Shanghai -1.99%, Hang Seng +0.03%, Nikkei -0.62%. China was uneasy about further rate hikes in US

 

Bonds – Japan 0.14%, Germany 0.46%, France 0.83%, UK 1.59%, Spain 1.64%, Portugal 1.94%, US 3.17%, Italy 3.58%, Greece 4.28%

 

Cable $1.3098, €/£0.9776, €/$1.1499, $/Y112.53 – Gold $1226.90 – Nymex $69.75, Brent – $80.07 

 

 

UK companies posting results this week – Thursday – Unilever, National Express, Vue International, Friday – Lloyds of London, Intercontinental Hotels, Provident Financial, Acacia Mining

 

 

US companies posting results this week – Thursday – Bank of New York, Mellon, Travelers, Snap-On, PayPal, American Express, Phillip Morris, Friday – Procter & Gamble

 

Economic data posted this week – Thursday – UK Retail sales, US Initial Jobless Claims, ADP Employment Index, Friday – UK PSBR, BOE Carney Speech, US Existing Home Sales

 

 

Opening calls FTSE +6 at 7060, DAX +3 points at 11718, CAC unchanged at 5144, DJIA futures -41 points at 25665

 

75% of retail investors lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.