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Reflect & Prepare


Reflect & Prepare

Fri, 12th Jan 2018 - Author: Reflect & Prepare

A week of macro news and politics, but where to begin? China announced that it may reduce or even exit purchases of US treasuries this week and this could have massive implications going forward. Subsequently China’s State Administration of Foreign Exchange, SAFE, pushed back on the report, saying it was "fake news''.

We then reversed some of those losses especially in the US Dollar but the problems didn't stop there for the US as PPI (producers prices) data was released and the greenback crashed again. Today we have had the release of the eagerly anticipated CPI (consumer price inflation) which came a little higher against expectations and the USD found some support, but it looks a slow grind towards the 2% target eyed by the Fed. 

Elsewhere in Germany, the chancellor Merkel and the SPD seem to be coming to an agreement on forming a coalition. In the wake of the ECB minutes, which reveal a review of policy language in the early part of the year, the EUR is now enjoying gains against most of its counterparts, but on the former, Merkel says there is still more work to be done. Conservative Christian Democratic Union bloc and the centre-left Social Democrats are said to have cleared a first hurdle towards the formation of the next German government after overnight talks - Merkel wants to finalise the tie up with the SPD by February. 

The inversely correlated equity markets and gold are currently both moving in the same direction. Gold today pushed through the $1320/oz handle today and has increased around 2% this week from its lows. The FTSE 100 has also enjoyed a move to all time highs edging toward the 7800 point mark. Commodities in general have been having a great week, Brent crude oil hit $70/bbl as API and DoE inventory levels revealed more drawdowns. API's in particular surprised markets with a huge -11mln vs the -3.9mln bbl expected. 

 

Corporate Stories

 

Sainsbury's Christmas trading period was a better-than-expected after a big contribution from Argos, full year profits are now likely to beat the current consensus forecast. Tesco shares were under pressure after its sales for the Christmas period missed City forecasts. For the 13 weeks to 25 November, increased like-for-like sales 2.3% in the UK and Ireland, and then for the six-week festive trading period to 6 January, saw LFL growth of 2.0%. expectations were for 2.4% growth in the third quarter and 2.8% for Christmas.

IG, Plus500 and CMC Markets were down after the Financial Conduct Authority raised concerns again about marketing of CFDs to retail investors. Apparently over 75% of CFD traders lose money according to FCA research and leveraging rules may change in the future. 

Marks & Spencer's UK like-for-like sales were off 1.4%. Over the 13 weeks to 30 December, M&S food LFL sales worsened by 0.4% and the Co. commented saying "ongoing trading pressures continued in the lead up to Christmas as consumer spending and choices reflected tighter budgets", though other supermarket groups seemed to do a lot better. Boohoo reported this week and despite results being encouraging shares fell as retailers in general were under pressure following a dismal performance elsewhere in the retail sector.

Housebuilder Barratt Developments shares fell as total completions improved in the first half of the year, but sales rates remained flat. Peers Taylor Wimpey and Persimmon also fell, while sector peer Bovis was flat ahead of its results due the following day. Taylor Wimpey was in the red today as it said 2017 results would be in line with forecasts, despite adding that it expects to achieve further growth and performance improvement in 2018. Bovis Homes shares rose after saying it built a lower number of homes in 2017 but reporting much improvement in its balance sheet and in customer satisfaction after the controversy that saw its previous chief executive depart under a cloud last summer.

Bargain Retailer B&M European Value racked up healthy gains as it reported a strong quarter of growth in the pre-Christmas period, helped by 22 new store openings and keeping prices low in the UK and Germany.

Carillion share plunged as the market were looking for the UK gov. to support the company but in the meeting today the UK authorities stated they are looking at potential contingency plans if the company were to fold. 

GKN shares rocked today after rejecting an offer from Melrose in favour of carrying out a restructure. The company has long been a target for acqusition but this time round the Co. managed to fend off interest.

 

What to look out for

 

Company updates - Rio Tinto PLC [RIO] Watkin Jones Plc [WJG] 1pm PLC [OPM] Ashmore Group PLC [ASHM]Dunelm Group PLC [DNLM]Greggs PLC [GRG]JD Sports Fashion PLC [JD.]Johnson Matthey PLC [JMAT]Ophir Energy [OPHR]

Baring Emerging Europe Plc [BEE]Plus500 Ltd [PLUS]Polo Resources Limited [POL]

K3 Capital Group Plc [K3C]NCC Group PLC [NCC]1pm PLC [OPM] BHP Billiton PLC [BLT]Burberry Group PLC [BRBY]

China New Energy Ltd [CNEL]Majedie Investments Plc [MAJE] Associated British Foods PLC [ABF]Experian PLC [EXPN]Headlam Group PLC [HEAD]Halfords Group PLC [HFD]NewRiver Retail Ltd [NRR]Royal Mail Plc [RMG]Ten Entertainment Group PLC [TEG]Workspace Group Plc [WKP]William Hill PLC [WMH]Whitbread PLC [WTB] Avacta Group PLC [AVCT]Keystone Investment Trust Plc [KIT]Equatorial Palm Oil PLC [PAL]Standard Life Equity Income Trust [SLET] Character Group (The) PLC [CCT]Megafon (PJSC) [MFON] Record PLC [REC]

 

Data Points - UK and EU CPI, BoC rate decision, AUD Jobs data, Chinese GDP, Turkish Rate Decision, Cad ADP, US Philly Fed, US Building Permits, UK Retail Sales


Have a great weekend

 

Kind Regards

Rajan Dhall

 

 

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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