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Reflect & Prepare

Reflect and Prepare

Fri, 1st Sep 2017 - Author: Reflect & Prepare

Another jam packed week this week, we have had ECB, NFP and GDP. Let’s start in the UK and the continues problems with Brexit, Barnier and Macron this week have stated that the numbers floating around in UK press regarding the exit bill are false. We still have not seen anything concrete from either party but Brexit Minister David Davis stated there is a clear disparity with expectations and what the UK are prepared to pay.

The week started slow with a bank holiday but Manufacturing PMI's surprised the market and beat expectations which led Brexiteers to reiterate the fact we do not need to stay in the EU to progress. BoE's Saunders spoke this week and the hawkish MPC member said The Bank of England should not keep interest rates at their record low as an insurance policy against the risk of a “bumpy Brexit” and it needs to start raising borrowing costs now, he went on the reiterate that a 25bps hike will not make a massive difference to the economy.

In the US data was bitter sweet, GDP data on Wednesday had the president dancing for joy when the reading came in at 3%. Trump gave an address regarding tax reform plans later that evening and was clearly happy with the number. His aggressive plan to lower the corporate tax rate from 35% to 15% looks like it may have legs as he sees it as his way to induce wage inflation. Today however was a different story, the monthly NFP report came in worse than expectations and the USD sold off further. This will be welcomed by Trump and the US as it induces exports to rise and inflation too. Mario Draghi over at the ECB must have been sitting there with his hands on his head after reading that number and a second ECB sources leak was reported straight away trying to talk down the rocketing EUR. The ECB have now stated they are not ready to talk about tapering in September but will be ready in December, this reversed all the losses from the aforementioned NFP report and the dollar was trading higher buy the end of the EU session.

Corporate news was on the light side this week, but the Halifax HPI index came in worse than expected and the housing bubble looks like it may be losing momentum. Housing stocks don't seem to care much as Persimmon and Barratt Developments both trade at near term highs. 

WH Smith posted results for the year to the end of August and should hit target and that it continues to see further opportunities for international growth in via the airport market.

Restaurant Group sales deteriorated as the first half of the year wore on, but the Frankie & Benny's and Garfunkel's owner posted a flat dividend as it reported early signs of improvement and broke back into the black, but through the grapevine I am hearing analysts talk about another profit warning so watch this space.

Ladbrokes shares will finish higher this week as a strong start of the year and a 7% jump in first-half operating profit was reported.

Petrofac shares trade lower after the Co. reported an adj EBITDA $323M vs prev $362M y/y, Rev $3.13B vs prev $3.89B y/y and cuts the FY17 IES EBITDA $80-100M and Capex $200-250M.

HSS Hire shares tumbled after reporting H1 Pretax -£14.2M vs prev £2.2M y/y, adj EBITDA £17.1M vs prev £32.1M y/y, Rev £160.5M vs prev £166.2M y/y. As you can see all much lower than estimates. They have broken through a massive support level of 45.18p and will need some change to induce a turnaround. 


What to look out for

Next week is central bank week with the RBA, RBC and ECB rate decisions. We also see UK services PMI, Australian GDP and UK manufacturing PMI.

Earnings come from: Plus 500, Redrow, 888 Holdings, Barratt Developments, Ashmore and Bovis homes.


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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