The Weekly Note is brought to you by the ALPHA: r² discretionary service team.
The Supreme Court has ruled this morning that Boris Johnson's proroguing of Parliament was unlawful, sending MPs back to work imminently. It said that the Prime Minister was wrong to prevent Parliament from doing its job. The decision is historically significant and could have a huge impact on Brexit; sterling surged initially following the news, as it lessens the chance that Johnson can force through a no-deal Brexit.
European markets are lacking direction today following mixed trade headlines overnight. US Treasury Secretary Steven Mnuchin indicated that talks with China are on track, but there were fresh doubts on the prospects of a deal between America and Japan following a threat from President Trump.
Last week saw an increase in volatility in global markets. Wall Street neared record highs midweek before confidence was shaken by trade tensions. The Federal Reserve lowered interest rates for the second time this year, but its commentary was more hawkish than expected. European equities were affected by the global oil supply disruption that occurred earlier in the week, but later stabilised. Oil prices rose as much as 19% after half of Saudi Arabia's oil production was wiped out in an attack, but optimism over the facility's recovery time grew throughout the week.
The Bank of England kept interest rates unchanged and it is largely expected to do so until there is more clarity over Brexit. In August, the UK's Consumer Price Index (CPI) fell from 2.06% to 1.72%, which was actually above the central bank's forecast.
In Japan, inflation also fell in August. Core CPI, which excludes fresh food, sank to a two-year low of 0.5%, in line with market expectations.
Finally, fears that Germany is heading into a recession sharpened last week following the latest composite purchasing managers' index reading. The manufacturing component for September revealed the biggest slowdown in factory activity since the financial crisis.
Thomas Cook collapsed in the early hours of yesterday morning after the company was unable to secure the extra £200m funding it required to stay afloat. The UK Civil Aviation Authority has launched “Operation Matterhorn” to repatriate some 150,000 British tourists - the largest such exercise since the Second World War.
Thomas Cook's Anglo-German rival Tui has reassured the market this morning that it expects full-year results to be “in line with expectations”, forecasting earnings before interest, tax and amortization to be €803m for the year to the end of September. Tui said it was “currently assessing the short-term impact of Thomas Cook's insolvency”.
Marks & Spencer has reduced the price of various staples by up to 40% in anticipation of its new delivery service that will rival Waitrose. When Ocado's contract with Waitrose ends next September, it begins a joint venture with M&S, which recently fell out of the FTSE 100.
Shares in Metro Bank tumbled this morning after a £200m bond sale was pulled on Monday night due to lack of demand. The bank's borrowing costs have risen since a misreporting scandal came to light in January. It needs to raise new debt before the end of the year to meet new EU regulations.
Close Brothers announced that its CEO will leave the company alongside its annual results this morning. Full-year profit fell by nearly 30%, which it partly attributed to “low levels of investor risk appetite”. Preben Prebensen will remain at the company for at least 12 months, after leading the merchant bank since 2009.
Subscribe today and email [email protected] to register your interest, and receive the full Weekly Note in your inbox every Tuesday.
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 Limited is authorised and regulated by the Financial Conduct Authority and is a member of the London Stock Exchange. 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.