The Weekly Note

10 April 2018

The Weekly Note

The Weekly Note, brought to you by the ALPHA : r² Managed Portfolio Service team

Market news

European markets kicked off the week in cautious fashion following a weekend dominated by atrocities committed on civilians in Syria. US president Donald Trump, amongst others, singled out Syrian and Russian leaders for blame after an attack involving chemical weapons on a rebel area in Syria. The US has imposed sanctions on Russia, causing its stock market to drop 8.7% yesterday, the biggest one-day fall since sanctions were imposed following Moscow’s invasion of the Crimea in 2014.

Wall Street enjoyed a better start to the week, rebounding sharply after a tough session on Friday. Trump, via Twitter, suggested that relations between him and Xi Jinping, China’s president, will remain more positive than some fear. His comments were in line with an optimistic view that the current bluster around Sino-American trade policies merely amounts to negotiation strategy. Xi Jinping also portrayed a more conciliatory stance last night.

Last week, the S&P 500 fell a further 1.4% after the verbal trade war hit new heights when Washington announced a potential $100bn of additional tariffs against China. Furthermore, there was an underwhelming jobs report which showed unemployment unchanged at 4.1%, wage growth also flat and job growth below expectations.

In the UK, heavy snow and weak consumer demand weighed on the services sector last month with activity rising at the slowest pace since just after the Brexit vote, according to a closely-followed survey by IHS Markit. As services account for c.80% of the UK economy, it’s likely a worrying sign for wider economic growth, which is expected to have decelerated to 0.3% in the first quarter.

UK house prices rose faster than expected last month but market activity remains subdued, according to mortgage data from Halifax. Meanwhile, a quarterly survey of finance directors by Deloitte has revealed some mixed news: following the transition deal, Brexit is no longer the biggest concern facing UK corporates – weak growth now tops the list.

Finally, oil prices are rallying strongly after significant trade-dispute driven falls last week, which came in spite of suggestions by various OPEC members of a production cut extension to 2019.

Stock focus

Following the announcement of sanctions on seven Russian oligarchs and their companies, billions of pounds have been wiped off the value of Russian stocks. Evraz, the FTSE 100 mining group party held by Roman Abramovich, fell 14% yesterday.

Deutsche Bank has axed its British chief executive, John Cryan, after losses in each of his three years in charge. New boss Christian Sewing has promised to take “tough decisions” to return the German bank to profitability, following multiple regulatory fines and disappointing financial performance.

Rathbone Brothers is in talks to buy the Scottish stockbroker Speirs & Jeffrey, which has £5.5bn of assets and is thought to be worth in the region of £200m. Rathbone last year failed to achieve a merger with Smith & Williamson that would have created a group managing more than £55bn.

The Co-operative Group is back in the black with profits of £72m for the year to January 6th, compared to a £132m loss last year when it wrote off its stake in the Co-op Bank. The Co-op experienced its strongest growth in its convenience stores, an area it is now focusing on.

Waitrose will stop serving disposable coffee cups in its stores as part of efforts to reduce plastic and packaging waste, for the majority of cups are never recycled due to plastic linings. The grocery chain said the move would save more than 52m cups a year – 2.5% of the UK’s annual total.

Meanwhile, Iceland is putting a freeze on the use of palm oil in its own-label range. The move follows pressure from Greenpeace, as palm oil is a leading cause of deforestation in south-east Asia and demand is projected to double by 2050.

Uber has acquired New York-based Jump Bikes, which allows riders to rent electric-powered bikes and dock them anywhere. A bike-sharing craze driven by China has led to a valuation boom of city-based rental companies, with this deal reportedly worth more than $100m. Bikes could present a greater competitive threat to Uber than any like-for-like competitor.

Important note

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It is important to remember that the value of investments can go down as well as up and it is possible to get back less than you invested, especially in the early years. Past performance is no guarantee of future returns and interest rates and dividends are variable and cannot be guaranteed in the future. Any tax treatment mentioned is based on personal circumstances and current legislation which is subject to change. In the event of a client having a complaint about our services we will do our best to resolve that complaint promptly and to the client's satisfaction. However if we are unable to do so, the client may have the right to complain to the Financial Ombudsman Service. Further information can be found on the Financial Ombudsman Services's Website at www.financial-ombudsman.org.uk.