Reflect & Prepare

Friday, 1st February 2019 14:44 - by Reflect & Prepare

It was a busy week in the US, with a number of key events which all fed through to a more positive backdrop for the Wall St indices. A Chinese delegation of trade representatives led by vice premier Liu travelled to Washington to resume talks with the US, and despite any concrete decisions likely at this stage, both sides reported good progress in the negotiations.  Indeed, president Trump announced that no deal would be agreed until he and premier Xi meet later in Feb.  

This backdrop has served as a further prop to global equities, but it was not until the FOMC announcement that we got a stronger jolt higher as the Fed statement confirmed a rate hike pause as well as the potential to pause quantitative tightening through a cessation in the balance sheet runoff which has been in play.  The current reinvestment cap is at $50bln a month, so any adjustment here will improve liquidity prospects, though naturally, this will draw criticism from certain quarters of the market that the Fed is feeding what has been described as a bubble in asset valuations in the US.  

Some would say the Brexit process has taken a step back as the early week vote on plan B resulted in two amendments passing through parliament - the actionable amendment from Sir Graham Brady to re-present the withdrawal agreement with 'alternative arrangements' to the Irish backstop.  Despite continued warnings from the EU that the deal cannot be renegotiated and that the backstop must stay, the amendment was agreed by a Tory and DUP majority, and the PM has travelled back to Brussels to try and get EU leaders to reconsider their stance due to the lack of support within the UK parliament.  As a result, fears of a no deal outcome have resurfaced, even though the other amendment passed in parliament that no deal could be voted against, carries no substance.  The EU insists that they are preparing for a no deal outcome, which suggests they are sticking to their red lines and that the backstop in its current form stays.

Movers and Losers

Metro Bank -22.97%: The banks boss is now fighting for his future as the company admitted wrongdoing in the loans book categorisation mistake.  

Banking sector -8% average: The sector has not been performing after the Fed decided to pause on QT and rates.

Ferrexpo +31% & KAZ minerals +10%: Miners have been supported by the Fed's decision mentioned above. Also massive amounts of stimulus has been reported in China. 

Shell 8%: The co's profits were helped by a higher average oil price and stringent CAPEX control. They have also announced a 3rd round of share buybacks. 

Week Ahead

Monday - AUD building approvals, UK construction PMI, US factory orders

Sealand Capital Galaxy Ltd [SCGL]

Tuesday - China closed, Fed's Mester speaks, AUD retail sales, RBA interest rate decision, UK services PMI, US PMI's, ISM non-manufacturing PMI,  Weekly API's

Amino Technologies PLC [AMO]Ocado Group Plc [OCDO]RM PLC [RM.]St Modwen Properties PLC [SMP]Severstal [SVST]

Numis Corporation PLC [NUM]Ten Lifestyle Group Plc [TENG]

BP PLC [BP.]Mattioli Woods PLC [MTW]

Wednesday - Indian rate decision, US retail sales, US GDP, DoE's, CAD Ivey PMI, Fed budget balance, AUD employment change

DP Poland [DPP]Electrocomponents PLC [ECM]Severn Trent PLC [SVT]Victrex PLC [VCT]

Barratt Developments PLC [BDEV]Frontier Developments Plc [FDEV]GlaxoSmithKline PLC [GSK]

Stride Gaming Plc [STR]

Thursday - German industrial production, Halifax house prices, BoE rate decision, Japanese household spending

Bellway PLC [BWY]Compass Group PLC [CPG]Cranswick PLC [CWK]EI Group Plc [EIG]Superdry Plc [SDRY]Tate & Lyle PLC [TATE]Thomas Cook Group PLC [TCG]

easyJet PLC [EZJ]Future PLC [FUTR]On The Beach Group Plc [OTB]

Kcell JSC [KCEL]Novolipetsk Steel [NLMK]Smith & Nephew PLC [SN.]

Supermarket Income Reit Plc [SUPR]

Friday - RBA statement, German trade balance, Nok GDP, Russian interest rate decision, CAD employment change, Baker Hughes oil rig count

SSE PLC [SSE]

Cerillion Plc [CER]

Have a great weekend

Kind Regards

Rajan Dhall