19 February 2019
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European equities are lower today, with some focus on a busy earnings period, but the general trend over the past week has been positive for global markets and US-China trade developments are still dominating the narrative.
Chinese stocks have touched a six-month high on optimism that an accommodative resolution is in sight, while Beijing and Washington have confirmed that top-level negotiations will take place at the end of this week. On the other hand, EU officials have threatened to retaliate if tariffs were imposed on European car imports to the US.
The S&P 500 rode sentiment to end last week 2.6% higher, while the Euro STOXX 600 and FTSE 100 finished 3.1% and 2.6% up respectively, despite disappointing economic growth data from Germany and another dispiriting week for Prime Minister Theresa May’s Brexit plan.
In the UK, the number of people employed has reached another record high, while the unemployment rate has dropped to its lowest level since 1975, at 4%. The figures, released by the Office for National Statistics this morning, also reveal that average earnings increased by 3.4% in the year to December. Given consumer inflation hit a two-year low of 1.8% in January, it means real wage growth has also hit a multi-year high.
In politics, seven MPs quit the Labour Party yesterday to form a new outfit which they have named the Independent Group. It cited Jeremy Corbyn’s handling of anti-Semitism and Brexit as main reasons for the split, but today it has also urged Conservative MPs to join the splinter party.
America felt an unexpected rise in unemployment data last week, as well as a fall in retail sales. A stable inflation reading, however, saw US Treasury yields nudge upwards and the US Dollar Index rose by 0.5% last week, whilst sterling moved the other way amid Brexit headwinds.
Oil prices have moved higher over the past week, with Brent crude oil lifting over $66.5 a barrel before stalling today. Tailwinds have been provided by rising Chinese imports and growing belief that OPEC will carry on making supply cuts.
|Share||Closing Values at 18/2/19||Year high||Year low|
|DJ Industrial Average||25,883||26,952||21,713|
|UK Gifts||% Yield||Price|
|FOREX versus US Dollar||Last||% Change**|
|Commodities||Price (USD)||Change**||% Change**|
|Brent Crude Oil||66.50||-0.24||-0.36|
Profits at HSBC missed analysts’ expectations this morning, despite rising almost 16% in 2018. The bank’s shares are down over 4% this morning amid concern that it has been hit by slower growth in China and the nation’s trade dispute with America. HSBC makes a majority of its profit in Asia.
BHP Group reported a fall in first-half profit this morning, as a series of output disruptions coincided with a decline in copper prices. Outages in its Australian and Chilean operations contributed to an 8% fall in underlying profit in the last six months of 2018, to $4.03bn.
Greggs has upgraded its profit expectations for the third time in as many months, saying it had made an “exceptionally strong start to 2019” and crediting its new vegan sausage rolls for part of the 9.6% rise in sales that it has enjoyed this year so far. The vegan roll was launched in tandem with ‘Veganuary’, a wider movement that encourages a plant-based diet in January.
Honda has revealed that it will close its car factory in Swindon within two years, putting 13,500 jobs under threat. The Japanese auto giant blamed a need to focus on electric cars and other high-volume manufacturing locations for the move and said the decision was unrelated to Brexit.
Reckitt Benckiser has said that a break-up of the company would not happen before mid-2020, when a strategic restructuring plan is due to be complete. The ongoing shake-up intends to produce two separate business units, but whether a full split occurs will depend on the “opportunities to maximise shareholder value”, Reckitt’s chairman said.
Intercontinental Hotels reported a better-than-expected rise in operating profit of 8% during the 2018 calendar year. Revenue per available room rose by 2.5% during the period, which the chief executive dubbed “excellent progress”.
Flybmi ceased to operate over the weekend, cancelling all of its flights and filing for administration. It cited rises in fuel costs, as other recently-troubled airlines have, but also increased carbon costs due to the EU’s decision to exclude the UK from full participation in its Emissions Trading Scheme. Flybmi operated 17 planes within Europe.
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