Above page content

    Site map  Cookie policy

Back to News & OpinionPrint this page

Charles Stanley News21.04.2017

Last Week in the City

Garry White, Chief Investment Commentator, looks at the market-moving events that have shaped the UK equity markets this week (April 18 to 21, 2017).

The UK’s blue chip index was down 0.3% over the week. Prime Minister Theresa May called a snap general election in the UK which will be held on June 8. Tensions with North Korea continued, in the wake of the country’s missile tests. China and Russia deployed troops to their borders with the nation amid mounting fears of a military clash between Pyongyang and the United States.

Economics

The International Monetary Fund (IMF) upgraded its UK growth forecast for 2017 – the second upwards revision in three months - from 1.5% to 2%. The IMF also upgraded its UK forecast for 2018, from 1.4% to 1.5%.

UK retail sales recorded their largest decline in seven years in the first quarter as consumers felt the pinch from accelerating inflation. Sales fell 1.8% month-on-month in March, more than the expected 0.2%.

A rise in the euro-zone April composite purchasing managers index (PMI) added to evidence that the economy is faring well, and points to strong GDP growth of up to 0.7% per quarter, according to Capital Economics. However, output in Germany decelerated more than expected as momentum in its service sector softened, pointing to weaker expansion ahead.

Geopolitics

Theresa May called a snap general election in the UK, which prompted a rally in the pound. It will be held on June 8, with the prime minister expecting to increase her majority significantly. Many expect that Ms May will win a landslide victory. John Redwood, Chief Global Strategist, explains what will happen next in the UK elections and what this means for Brexit here.

The first round of the French Presidential election, to be held this weekend, is now too close to call. John Redwood takes a look at what could happen here.

Tensions with North Korea after its missile tests continued, with both China and Russia sending troops to their borders with the nation amid mounting fears of a military clash between Pyongyang and the United States.

In the US, markets reacted well to comments from Treasury Secretary Steven Mnuchin, who said “Whether health care gets done or doesn’t get done, we’re going to get tax reform done,” adding “We’re pretty close to being able to bring forward what is going to be major tax reform”. US president Donald Trump has made a number of policy changes over the last few weeks. John looks at their effect on markets here.

Bond markets

Government bonds benefited from the “risk-off” environment, with 10-year yields bouncing off key resistance levels.

Emerging markets

In China, the securities regulator stepped up criticism of what it called disruptive trading behaviour, with chief Liu Shiyu saying the nation’s stock markets should punish irregularities “without mercy.” This prompted the largest weekly fall in Chinese shares in 2017.

Russian Prime Minister Dmitry Medvedev said the Russian economy had avoided "catastrophe" despite low world oil prices and Western sanctions over Moscow's interference in Ukraine.

Brazil’s economy is showing signs it's climbing out of its two-year recession. “The economy will likely get to the end of this year with a meaningful growth rate," finance minister Henrique Meirelles said.

Energy

Oil prices slid 5.1% over the week by mid-session on Friday, with Brent crude futures trading at about $53 a barrel. The falls were despite signs Opec will likely prolong its output cuts, as US production continues to rise. Goldman Sachs, however, blamed the fall on technical factors, with the slide accelerating as prices traded through their 50 and 100-day moving averages. Global demand for oil is finally close to outstripping supply after nearly three years of surplus production, despite growth in the overhang of unused crude, the International Energy Agency said. BP is reportedly considering the sale of its stakes in three Canadian oil sands projects, as part of its strategy of retreating from non-core businesses. US oil giant Exxon Mobil has applied to the US Treasury Department to be exempt from sanctions against Russia in a bid to resume its joint venture with the Russia oil giant Rosneft in the Black Sea.

Mining

Mining shares were generally weak on the back of weaker iron-ore and base metals prices, despite the latest Chinese economic data showing better-than-expected growth in the first quarter of 2017. Growth accelerated to 6.9%, its fast pace since the third quarter of 2015.

Financials

HSBC agreed to pay about $2m to settle a civil fraud lawsuit that alleged the bank improperly attempted to get reimbursement from the federally-backed US Small Business Administration (SBA) on bad loans it knew were based on fraudulent or potentially fraudulent information. Emerging-market fund manager Ashmore saw an improvement in its business in the first three months of 2017. Assets under management rose 7% in its third quarter to March, reversing outflows in the previous quarter. Asset manager Henderson Group posted a 2.1% rise in assets under management over the first-quarter, as market and currency gains more than offset outflows from retail and institutional clients. In the US, Morgan Stanley and Bank of America posted a strong set of first-quarter results, but numbers from Goldman Sachs disappointed.  

Retail

Debenhams profits fell in the first half of the year and its strategy update, unveiled by its new chief executive, failed to inspire. Shares in luxury group Burberry were also weak after it missed expectations for retail sales growth in its second-half update. Chinese markets are recovering, but the strong dollar has hit US sales. Mike Ashley’s Sports Direct bought a bankrupt American retail chain for $101m, its first move into the US market. The “athleisure” retailer bought Eastern Outfitters, which owns discount chain Bob's and Eastern Mountain Stores. Associated British Foods reported a 36% rise in first-half profit, driven by a recovery at its sugar business and a resilient performance at clothing chain Primark.

Consumer

Dettol and Cillit Bang maker Reckitt Benckiser reported flat like-for-like sales due to weak markets in Europe and North America, the fallout in South Korea over a dehumidifier safety scandal, and a failed new Scholl product. Total sales rose 15% to £2.64bn in its first quarter, sending its shares lower. The market responded better to an update from rival Unilever, which has vowed to improve shareholder returns after it rebuffed a takeover offer from US group Kraft Heinz. The Flora margarine and Knorr stock maker said underlying sales increased 2.9%, lifted by higher prices. The company also upped its quarterly dividend by 12%. Shares in Restaurant Group, which owns brands including Garfunkel's and Frankie & Benny's, said its finance chief Barry Nightingale would leave the company immediately. The former head of Monarch Airlines departs less than a year after he was appointed to help turnaround the group.

Media

Pay TV group Sky released a mixed set of nine-month results. Revenue growth remained healthy, but this was more than offset by higher costs associated with the new Premier League broadcast deal.  The outcome, however, was broadly in line with expectations and the group reiterated its full-year guidance. The company is currently in a takeover situation with 21st Century Fox. Regulator Ofcom has been asked to consider the implications of the deal for media plurality and 21st Century Fox’s commitment to media standards. The deadline for Ofcom to report back to the Secretary of State is May 16. Hopes were rising ahead of WPP’s update next week after French advertising peer Publicis beat analyst expectations, with a particularly strong performance in the UK.

Technology

Shares in US listed auction site eBay were out of favour after it said second-quarter profit will fall below Wall Street expectations. Netflix shares fell following a mixed quarterly report failed to impress.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

 

Share

Customize This