The Weekly Note is brought to you by the ALPHA : r² discretionary service team.
Most equity markets are slightly lower today in the face of further jostling between the US and China. With the respective presidents due to come face to face at the G20 summit in Argentina this weekend, investors are betraying a few nerves after Donald Trump’s latest threat to expand the scope of tariffs on Chinese imports “if we don’t make a deal”.
Last week, the S&P 500 fell 3.8%, erasing this year’s gains in the process, as concern grew over the outlook for global growth. Persisting uncertainty with regards to Brexit arrangements added to negative sentiment and encouraged Europe’s Stoxx 600 index to fall 1.0% while the FTSE 100 retreated 1.9%.
Meanwhile, sterling has dropped below $1.28 due to political tension in the UK. Focus is on the government’s prospects of getting the withdrawal agreement through parliament. The EU must achieve a similar feat at a summit of the region’s leaders, but it is thought that the continent has the better side of the deal. The UK parliament has a vote on December 11th and Theresa May has urged her cabinet to persuade MPs to embrace the deal.
In Europe, Italian debt rallied last week at the prospect of more austere fiscal policy after the European Commission rejected preliminary budget plans from Italy’s populist coalition government. Yesterday, however, the government said it would stick to its plans, setting up a potential standoff with the EU. Separately, the euro area Flash Composite Purchasing Managers’ Index, a measure of business activity in Europe, came in at 52.4, its lowest since late 2014.
Japan’s Topix index rose 0.7% overnight, helped by financial and telecoms stocks, but the country is still struggling to generate any meaningful inflation. Japan’s core consumer price growth stalled in October, rising 1% year-on-year, the same as the previous month. It means the key inflation marker sits only half way towards the Bank of Japan’s target.
Finally, Brent crude oil has suffered another week of losses, currently managing to just remain above $60 a barrel. Last week’s decline was somewhat moderated by Trump voicing support for OPEC price targeting.
|Share||Closing Values at 1/10/18||Year high||Year low|
|DJ Industrial Average||24,640||26,952||23,345|
|UK Gifts||% Yield||Price|
|FOREX versus US Dollar||Last||% Change**|
|Commodities||Price (USD)||Change**||% Change**|
|Brent Crude Oil||60.48||0.47||0.78|
This morning’s main story is that Thomas Cook has released a second profit warning, just two months after causing the City to reduce its forecasts following a first warning. Shares are down more than 21% at time of writing as the market digests the airline’s admission that “2018 was a disappointing year”, blaming the UK’s heatwave for a lack of passengers.
More positively, shares in Greggs have jumped 13% today after announcing that bumper sales in October and November mean that profits in 2018 should be stronger than previously expected. The bakery chain said that sales increased by 9% in the previous eight weeks and that its expanded Christmas range should continue momentum.
Shaftesbury, the London West End-focused property developer, has reported a fall in profit this morning which it partly attributed to lower valuation gains. The company was positive about underlying performance, however, saying it was “largely unaffected by widely-reported headwinds affecting the national economy and consumer confidence”.
Pennon Group has reported an 8.7% rise in first-half pre-tax profit this morning, generated out of a 3.1% rise in revenue. The FTSE 250 water-to-waste company said it was on track to meet its full-year expectations of earnings and cost savings.
Capita revealed last week that it has agreed a strategy to reduce its pension deficit, a plan that will take four years and cost £176m. Current boss Jonathan Lewis was heavily critical and too short-term focused when he arrived in January. He claimed that the pension agreement was “an important milestone in Capita’s transformation”.
Centrica’s share price fell as much as 8% last Thursday, to its lowest level in six months, after revealing a significant loss of customers. The owner of British Gas lost 372,000 home energy customers in the four months before November, a 3% fall since June.
|Date||Category||Country||Event||Reuters poll||Prior estimate|
|27/11/18||Surveys & Cyclical||United States||United States-Consumer confidence - Consumer Confidence||135.9||137.9|
|28/11/18||Surveys & Cyclical||Germany||Germany-GfK consumer confidence - GfK Consumer Sentiment||10.5||10.6|
|28/11/18||National Account||United States||United States-Corporate Profits Prelim - Corporate Profits Prelim||2%||2.40%|
|28/11/18||Consumer Sector||Japan||Japan-Retail Sales - Retail Sales YY||2.60%||2.20%|
|29/11/18||Labour Market||Germany||Germany-Unemployment - Unemployment Rate SA||5.10%||5.10%|
|29/11/18||Surveys & Cyclical||Eurozone||Euro Zone-Sentiment - Business Climate||0.96||1.01|
|29/11/18||Surveys & Cyclical||Eurozone||Euro Zone-Sentiment - Consumer Confid. Final||-3.9||-2.7|
|29/11/18||Prices||Japan||Japan-CPI Tokyo - CPI Core Tokyo YY||1%||1%|
|29/11/18||Labour Market||Japan||Japan-Unemployment rate - Unemployment Rate||2.30%||2.30%|
|30/11/18||Surveys & Cyclical||United Kingdom||United Kingdom-GfK consumer confidence - GfK Consumer Confidence||-11||-10|
|30/11/18||Prices||United Kingdom||United Kingdom-Nationwide house price - Nationwide house price yy||1.70%||1.60%|
|3/12/18||Surveys & Cyclical||China (Mainland)||China (Mainland)-PMI - Caixin Mfg PMI Final||50||50.1|
Old Change House
128 Queen Victoria Street
London EC4V 4BJ
020 3100 8000
This publication is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this document constitutes advice to undertake a
transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips.
Walker Crips Investment Management is a trading name of Walker Crips Stockbrokers Limited which is a member of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered office: Old Change House, 128 Queen Victoria Street, London, EC4V 4BJ. Registered in England number 4774117.
No news or research content is a recommendation to deal. It is important to remember that the value of investments and the income from them can go down as well as up, so you could get back less than you invest. If you have any doubts about the suitability of any investment for your circumstances, you should contact your financial advisor.
Investors should be aware that past performance is not a reliable indicator of future results and that the price of shares and other investments, may fall as well as rise and the amount realised may be less than the original sum invested.
Walker Crips Group plc (Old Change House, 128 Queen Victoria Street, London EC4V 4BJ), registered in England, registered number 1432059, incorporates the following companies which are authorised and regulated by the Financial Conduct Authority: Walker Crips Investment Management Limited registered in England number 4774117 member of the London Stock Exchange, Walker Crips Wealth Management Limited registered in England number 3790291, Ebor Trustees Limited registered in England number 3514268, Barker Poland Asset Management LLP registered in England and Wales number OC341149.