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Reflect & Prepare


Reflect and Prepare

Fri, 29th Sep 2017 - Author: Reflect & Prepare

 

It has been a busy week in the financial markets from a macro perspective,  I dubbed this week the week of speaks with highlights from BoE's Carney, Fed's Yellen, President Trump and many more. Many of the comments were the same old I am afraid, but from a UK perspective a rate hike this year is almost 100% priced in by fixed income markets on the short end of the curve. The UK 2 YR Yield has moved from a low of 0.13% to a high of 0.49% in just 21 days which indicates that the market believes that Carney and Co. will hike at least once this year by 25bps. Carney was on the radio today and sounded hawkish but indicated there are some concerns, most of all in the rate in which average wages are increasing and household debt. The Pound was knocked back a little this morning on the release of second reading of UK Q2 GDP where the yoy rate slipped from 1.7% to 1.5%, casting a shadow over some of the positive light shed on growth rates by the BoE recently. No disputing that inflation is a key factor in the change in MPC leaning, but on business investment, rise of 0.5% did reflect on some of their additional reasoning for raising rates sooner rather than later.  

Over in the States, the main takeaway was Trumps proposed tax plan, the president indicated it would fall to 20% from 35% which would be the biggest tax deduction in US history. This is his way of hopefully fueling the markets and increasing pressure on sluggish wage growth. We also saw US GDP QoQ for Q2 which came in at 3.1% vs exp 3.0%, this gave much pleasure to Trump and also Fed Chair Yellen who also spoke this week to reiterate that we could see another rake hike depending on inflation readings, which look like they have improved. Lastly from a macro perspective we heard from ECB president Draghi who said “Overall, we are becoming more confident that inflation will eventually head to levels in line with our inflation aim, but we also know that a very substantial degree of monetary accommodation is still needed for the upward inflation path to materialize,” this is also nothing new but it looks like Draghi sees the strong EUR needs to be addressed and is willing to throw in the old dovish comment to try and induce weakness. 

From a corporate perspective, Imagination Technologies bounced 33% after the company Co. agreed late on Friday to be taken over by US-based, Chinese-backed private equity firm Canyon Bridge Partners for £550m. If you remember I covered the story that Apple had made the decision to produce products in house which meant a 40 - 60% loss of revenue for the company, looks like a much needed but of good news for investors. 

Entertainment One shares slumped earlier in the week as its operating performance since March was on track with its full-year targets, despite revenues from the reshaped film business being lower than last year. 

Imperial Brands took a hit as the Co. confirmed it was in talks to help rescue UK tobacco supplier Palmer & Harvey, and said it expected to deliver strong growth in full year revenues and earnings at actual currency rates.

EVR Holdings reported that the Company completed a successful fundraise for £5 million before costs. On the 22nd June 2017 MelodyVR, entered into a global distribution and marketing partnership with Microsoft Corporation and as at 30th June 2017 the Company has cash and cash equivalents in excess of £6.5 million for future expansion and development.

LCG reported that client volumes were up 25% (2016 H2: 102bn, 2017 H1: 127bn) and client net deposits per month up 71% (2016 H2: £1.4m, 2017 H1: £2.4m). This didn’t do too much to inspire the share price which is stuck between a range of 2p - 2.50p.

 

What to look out for next week:

UK Manufacturing PMI (Sep), US ISM Manufacturing PMI, RBA Interest Rate Decision, UK Construction PMI, UK Services PMI, US ADP and Non Farm Payrolls, ECB Publishes Account of Monetary Policy Meeting and Canadian employment

Earnings: Tesco, DFS, James Halstead, SCS group and Europa Oil and Gas

 

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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