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.

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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.

MARKET UPDATE

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

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

David Buik

Communications

Mobile – 07788 144 877

 

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

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

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

WEEKLY FAYRE

WEEKLY FAYRE – Monday 26th February 2018

 

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

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

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

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

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

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

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

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

 

Percy Bysshe Shelley – poet – 1792-1822

 

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

 

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

 

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

 

David Buik

Communications

Mobile – 07788 144 877

 

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

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

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

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

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

 

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

 

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

 

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

David Buik

Communications

Mobile – 07788 144 877

 

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

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

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

WEEKLY FAYRE

WEEKLY FAYRE – Monday 19th February 2018

 

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

  

John Keats – poet – 1795-1821

 

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

 

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

 

 

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

 

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

 

 

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

 

 

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

 

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

 

 

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

 

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

 

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

 

David Buik

Communications

Mobile – 07788 144 877

 

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

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

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

MARKET UPDATE

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

 

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

 

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

 

David Buik

 

Communications – 07788 144 877

 

www.finsamarkets.com

 

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

WEEKLY FAYRE

WEEKLY FAYRE – Monday 12th February 2018

 

“Now is the winter of our discontent

Made glorious summer by this sun of York;

And all the clouds that lour’d upon our house

In the deep bosom of the ocean buried.

Now are our brows bound with victorious wreaths;

Our bruised arms hung up for monuments;

Our stern alarums changed to merry meetings,

Our dreadful marches to delightful measures.

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

And now, instead of mounting barded steeds

To fright the souls of fearful adversaries,

He capers nimbly in a lady’s chamber

To the lascivious pleasing of a lute.

But I, that am not shaped for sportive tricks,

Nor made to court an amorous looking-glass;

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

To strut before a wanton ambling nymph;

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

Cheated of feature by dissembling nature,

Deformed, unfinish’d, sent before my time

Into this breathing world, scarce half made up,

And that so lamely and unfashionable

That dogs bark at me as I halt by them;

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

Have no delight to pass away the time,

Unless to spy my shadow in the sun

And descant on mine own deformity:

And therefore, since I cannot prove a lover,

To entertain these fair well-spoken days,

I am determined to prove a villain.”

 

 

 

William Shakespeare – poet & playwright – 1564-1616

 

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

 

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

 

 

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

 

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

 

 

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

 

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

 

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

 

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

 

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

 

 

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

 

 

David Buik

Communications

Mobile – 07788 144 877

 

CORE SPREADS

 

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.