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Reflect & Prepare


Reflect and Prepare

Fri, 15th Sep 2017 - Author: Reflect & Prepare

What a week! This week did not disappoint in terms of macroeconomic news. The Bank of England got themselves in a right muddle and completely U-turned over policy compared to remarks heard in August. It all started with the CPI readings on Tuesday, a higher than expected reading of 2.9% sent the markets into a frenzy and GBP rose and the FTSE fell, this was due to the fact that traders and investors felt that the BoE would have to normalise sooner rather than later. 

Then on Wednesday we had the Jobs numbers which also disappointed, this time traders felt that Gov Carney could not normalise now as it would put pressure on household incomes due to the cost of mortgages. 

Lastly on 'Super Thursday' the bombshell was dropped, asset purchases will be wound down in the coming months and the BoE are seriously looking at interest rate rises. The news hit the markets and the FTSE 100 sold off and the pound hit levels not seen since the referendum. 

In my view the Bank of England have now lost some credibility, after categorically saying they would not move for the rest of the year and they could handle a small inflation overshoot, they have now backtracked on their word. Some pressures will be abated i.e. inflation but the rise in mortgage payments might offset that. Regardless we are now in a scary time of high inflation, low wage growth and over inflated asset bubbles.

In commodity markets, another OPEC debacle is brewing. We have seen comments this week that will please the likes of Shell and BP. Iranian and Saudi oil ministers have stated that they are willing to look at a 3-6 month extension to the production cuts which are scheduled to finish in March. Nigeria however are not so cooperative, saying they will only look at another deal when they get back up to the 1.8mln/bbl per day level before the problems in the country. The next meeting is on September 22nd next week and we are sure to see more drama there.

 

In corporate news

 

JD Wetherspoon performed well after a 43% shot of earnings growth and a passionate diatribe about Brexit from founder and chairman Tim Martin.

Sky seld of after news that 21st Century Fox being referred by Culture Secretary Karen Bradley for an in-depth investigation due to concerns over broadcasting standards and 'media plurality' 

Next shot up 18% from this week’s lows after reporting H1 PBT £252M vs prev £273.5M y/y, Rev £1.89B vs prev £1.94B y/y and Co. raises FY17 Pre-tax £687-747M, EPS to -13.1% to -5.5% y/y 

Dunelm shares rose as it said the new financial year had started well, even though full-year profits dropped to towards the lower end of expectations.

Morrison’s shares sold off after the Co. reported that H1 pre-tax profit rose by 12.7% to £177 million while reported pre-tax profit was up 39.9% to £200 million.

 

Next week

GVC Holdings, Petra Diamonds, Gulf Keystone, Hurricane Energy, Capita and Saga all report to name a few 

Data Points: EU CPI, German ZEW, UK Retail sales, US Interest rates, NZD GDP, German Manufacturing, US Services and Manufacturing PMI's

 

Have a great weekend

 

 

 

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.




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