May under fire; Spain threatens veto over Gibraltar; US inflation increases to 2.5%

20 November 2018

May under fire; Spain threatens veto over Gibraltar; US inflation increases to 2.5%

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Market news

Global technology stocks are setting a negative tone for the second consecutive week, after concerns over slowing iPhone demand and the impact of tariffs between the US and China caused a sharp sell-off for the sector on Wall Street yesterday. There are fears that chipmakers could suffer from the US-China trade war, while losses in Europe have been less severe. The FTSE 100 has slid c.0.5% this morning, retreating back below 7,000 points.

Otherwise, focus has been largely directed at Theresa May and the intense criticism of the withdrawal deal that the prime minister has agreed with Brussels. Multiple high-profile cabinet ministers resigned in protest last week, including the Brexit secretary. Critics accuse her of conceding too much ground, leaving the UK at the mercy of EU rules and potentially bound by the Northern Irish ‘backstop’ issue.

There have been multiple calls for a vote of no confidence against May, but nothing tangible has emerged yet. The withdrawal agreement would need to pass through UK parliament and an EU summit, where Spain has threatened to use its veto if there is not clarification of Gibraltar’s status. Sterling fell sharply at the end of last week, limiting the FTSE 100’s losses to around 1%, while the Euro Stoxx 600 index fell over 2% during the week.

The Confederation of British Industry, however, urged parliament to back the agreement, saying it is better than a ‘no-deal’ situation. The comments were made at the CBI’s annual conference yesterday, where May was welcomed warmly.

Elsewhere, headline inflation in the US came in at 2.5% in October, year-on-year. The pace of 0.3% for the month itself was driven by food and energy prices. Crude oil prices actually started declining in October, but there is generally a lag between the industrial benchmarks and retail petrol prices.

Crude oil prices have not stopped falling since October, either. An eighth consecutive week of rising US supplies saw prices, which reached bear territory last week, fall again. Concerned investors are hoping for news of supply cuts at OPEC’s December meeting.

 

Economic data*

Share Closing Values at 1/10/18 Year high Year low
FTSE 100 7,001 7,904 6,852
FTSEurofirst 1,399 1,588 1,371
DAX 11,245 13,597 11,051
DJ Industrial Average 25,017 26,952 23,345
S&P 500 2,691 2,931 2,581
NASDAQ 7,028 8,133 6,631
Hang Seng 25,840 33,484 24,541

 

UK Gifts % Yield Price
10 Year 1.38 102.29
2 Year 0.69 102.18
5 Year 0.91 90.27
30 Year 1.94 90.28

 

FOREX versus US Dollar Last % Change**
British Pound 1.28 -0.11
Euro 1.15 -0.19
Japanese Yen 112.54 -0.11
Canadian Dollar 1.32 0.02

 

Commodities Price (USD) Change** % Change**
Brent Crude Oil 66.79 -0.7 -1.05
Light Crude 57.2 -0.45 -0.79
Gold LBMA 1,223.98 0.43 0.04
 
* Source: Thomson Reuters
** From previous day close

 

Stock focus

The partnership between Renault, Nissan and Mitsubishi is in disarray after the arrest of its chief executive, Carlos Ghosn. Ghosn has been detained in Japan on suspicion of tax evasion and misuse of corporate funds, including under-reporting his compensation and purchasing luxury properties in his hometowns with company money.

EasyJet’s earnings were restricted by heavy losses from the takeover of some of Air Berlin’s operations, but its pre-tax profits for the year still increased by 15%. Over the year it carried a record 88.5m passengers, helped by struggling competitors.

Halma revealed its interim results this morning, warning that Brexit could cause short-term supply chain issues in March, including a disruption to customer buying patterns. Meanwhile, first-half profits at the FTSE 100 safety, health and environment technology group jumped by 23%.

Banking group CYBG reported a full-year loss of £164m this morning, following nearly £400m of charges related to PPI mis-selling. Underlying profits rose by 13%, however, just below analysts’ forecasts.

Polypipe, the plastic piping and ventilation system manufacturer, said this morning that its revenue has increased 10.2% in the four months through October. Organic growth in residential sales has driven recent performance, while the closure of a factory in the Middle East will boost margins in the region.

BHP Billiton has agreed to pay around £300m to solve a dispute with Australia’s tax authorities, but insisted that it was “no admission of tax avoidance”. The world’s biggest mining company has agreed to changes that will result in higher tax receipts in the future, however.


Royal Mail’s share price has dropped off promptly since announcing that half-year profits more than halved, despite revenue increasing by 1%.  Delivering its first-half results last week, the company defiantly said that it had a range of actions in place to improve performance and would update investors in March.

 

Date Category Country Event Reuters poll Prior estimate
20/11/18 Prices Germany Germany-PPI - Producer Prices YY 3.30% 3.20%
20/11/18 Surveys & Cyclical United Kingdom United Kingdom-CBI trends - orders - CBI Trends - Orders -7 -6
21/11/18 Government Sector United Kingdom United Kingdom-Public Sector Borrowing - Public Sector Net Borrowing Excluding Banks GBP 6.15b GBP 4.12b
21/11/18 Labour Market United States United States-Jobless - Initial Jobless Claims 215k 216k
21/11/18 Industry Sector United States United States - Existing Homes Sales - Exist. Home Sales % Chg 1% -3.40%
21/11/18 Prices Japan Japan-CPI Nationwide - CPI, Core Nationwide YY 1% 1%
22/11/18 Surveys & Cyclical Eurozone Euro Zone-Consumer confidence - Consumer Confid. Flash -3 -2.7
23/11/18 National Account Germany Germany-GDP Detail - GDP Detailed YY NSA 1.10% 2.30%
23/11/18 Surveys & Cyclical France France-PMI Flash - Markit Comp Flash PMI 53.9 54.3
23/11/18 Surveys & Cyclical Germany Germany-PMI Flash - Markit Comp Flash PMI 53.2 52.7
23/11/18 Surveys & Cyclical Eurozone Euro Zone-PMI Flash - Markit Comp Flash PMI 53 52.7
27/11/18 Surveys & Cyclical United States United States-Consumer confidence - Consumer Confidence 136.2 137.9
Source: Thomson Reuters

 

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May under fire; Spain threatens veto over Gibraltar; US inflation increases to 2.5%

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