Macro, Markets, and Companies

Friday, 25th August 2017 15:23 - by Reflect & Prepare

This week has been pretty crazy for a summer one! Dixons and Provident Financial capitulated and Jackson Hole took centre stage. Lets start with the macro stuff...

There was a stream of rumors suggesting that Mario Draghi would spell out the end of the ECB's QE programme on Wednesday. As that didn't happen during his address, the EUR began to sell off, but the ECB was not the only central bank rumored to address this situation. The Fed have also been discussing tightening with Mester and Kaplan both stating they are in favour. Fed Chair Yellen was expected to speak about monetary policy; the USD sold-off across the board as there was no mention and Yellen spoke more about regulation. Gold also saw some very erratic price action but then bounced back to pre announced levels after the event.

FX has also been affecting the equity markets this week and in my blog column I wrote about the beleaguered Dixons Carphone. The weaker pound has induced a margin squeeze on many imported mobile phone handsets and tech. The CEO was surprised at the extent of the stockmarket reaction, stating that the share price will bounce back as investors look for a bargain. This is an interesting concept as the pound has recovered some of its losses since the Referendum and the share price fell over 20%. They are also implementing a cost cutting plan which also could bode well for the future.

Provident Financial also nose-dived this week after the extent of their bad loans had been revealed and the CEO departed. The company that owns the credit card company Vanquis detailed the problems they are having in collecting large numbers of debts. Apparently, their debt collectors have complained, stating that they are not able to recoup what they had expected and, of course, downgrading guidance is never going to be good.

Elsewhere in equities, supermarkets have something to worry about. Amazon who recently bought Wholefoods said they are set to drop prices at the organic supermarket and offer a delivery service like no other. Sticking with supermarkets, Kantar Worldpanel showed the big four are going strong and Lidl stepped up to become the 7th largest grocer in the country. Tesco shares rose as it came out way ahead in terms of market share at 27.8%.

Persimmon reported a 30% improvement in its profit before tax in the six months to 30 June on Tuesday; to £457.4m. But it was not all rosy for the homebuilders as Rightmove said overnight that house prices fell 0.9% in August, marking their biggest month-on-month fall of the year.

BHP Billiton reported they are in profit for the full year and upped its final dividend, and Antofagasta advanced after posting a jump in earnings for the first half as revenues rose amid higher copper prices, which finally rose to over $3.00 and consolidated.

What to look out for next week
Next week we have US GDP and  Non Farms, EU CPI, Chinese Manufacturing, German unemployment, Canadian GDP, and UK Manufacturing. 

Earnings: Bunzl, Polymetal international, Petrofac, HSS Hire, Hays, Ladbrokes, and the Restaurant Group.

Have a great weekend.