“Fear no more the heat o’ the sun,

Nor the furious winter’s rages;

Thou thy worldly task hast done,

Home art gone, and ta’en thy wages:

Golden lads and girls all must,

As chimney-sweepers, come to dust.

 

Fear no more the frown o’ the great;

Thou art past the tyrant’s stroke;

Care no more to clothe and eat;

To thee the reed is as the oak:

The scepter, learning, physic, must

All follow this and come to dust.

 

Fear no more the lightning flash,

Nor the all-dreaded thunder stone;

Fear not slander, censure rash;

Thou hast finished joy and moan:

All lovers young, all lovers must

Consign to thee, and come to dust.

 

No exorciser harm thee!

Nor no witchcraft charm thee!

Ghost unlaid forbear thee!

Nothing ill come near thee!

Quiet consummation have;

And renownèd be thy grave!”

 

William Shakespeare – poet & playwright – 1564-1616

 

I think it would be churlish not to congratulate ITV Racing on its coverage of Cheltenham and Aintree as well as its ‘bread and butter’ weekend fayre.  It is a far superior product than Channel 4 Racing’s effort. Ed Chamberlin is an excellent and enthusiastic host. Francesca Cumani, Alice Plunkett and Jason Weaver are experts in their own field, as are Mick Fitzgerald, Luke Harvey and Sir AP. I salute them. The coverage of racing has been revitalised and it is user friendly!

 

Geopolitical issues in Russia, Syria, US, UK, and France took more of a back seat this week on most peoples’ investment agenda. The embers from the US/China trade spat are still smouldering and President Trump was reluctant to stay out of the headlines by continuing to make cryptic comments on James Coney as well as holding some slights doubts about his mission to North Korea next month. On the European front the EU continued to leave the U.K. in no doubt that it was no more enamoured with the negotiation process than the U.K. was. NO deal can certainly not be ruled out. The EU’s trade deal with the US has hit some rough waters and we understand that the U.K. is making good progress with India and Canada - small beer to ‘Remainers’, but nonetheless progress.

 

However, it was corporate news on both sides of the Pond, US 2nd quarter earnings and economics that mainly captured the imagination of fund managers, analysts and economists. The IMF had many positive comments to make about the world’s economy in Washington this week, but Mme Lagarde was very begrudging towards the U.K. She and the IMF very reluctantly agreed to put GDP up from 1.5% to 1.6% for 2018 with the world up a pip or two to 3.9%. We in the U.K. have got the message but I think it is fair to say we are over it, as the IMF’S forecasting for the U.K. economy in recent years has been woeful. Inflation in the U.K. thanks to the Pound rallying and clothes and some food prices falling dipped to 2.5%, whereas full employment is being maintained in the U.K. (unemployment rate 4.2%), with wage inflation rising to 2.8%. ‘One swallow does not make a summer’ but it is a start. Governor Carney started to prevaricate again against a hike in May, but symbolically the BOE is almost obliged to act. Again, forward guidance must be held to account. Mr Carney keeps being wrong footed on this issue. I was also pleased to see that Sam Woods, the BOE’S head of Prudential Banking, posted more realistic job losses figure over BREXIT in the financial sector down to 5-10k, on the same day the City of London was still officially considered the No:1 global centre, according to Duff and Phelps.

 

There was plenty of corporate news this side of the Pond. Hammerson’s £21 billion bid for Intu looks dead in the water and Klepierre’s interest seems to have been stifled. Sir Martin Sorrell bade farewell to WPP with no fanfare. The messy stuff is being kept under wraps. Many believe that Mark Read will land the spoils or possibly some luminary from Silicon Valley, but other market observers have thrown Jeremy Darroch’s, Adam Crozier’s, formerly of ITV, Roland Rudd’s and Andrew Robertson’s hats in to the ring as candidates. Darroch expressed amusement in telling the media he had no interest in the position and I doubt the others have either.

 

Edward Bramson has raised to his game to have Barclays split up - mad idea and with only 5.2% of the shares has he a realistic prayer? Investors were rather more interested in Barclays’ CEO Jes Staley’s possible fine for the whistleblowing offence. It could cost a year’s bonus. Unilever was under the cosh for wanting to move head office to Rotterdam in isolation. RBS and Lloyds Banking Group are lightening up jobs and branches and RBS is supposedly making a £3.5 billion provision for a pensions shortfall. The Government and GKN have just one month to ward off Melrose’s attentions. It has an 82% shareholder approval. Their efforts may be forlorn. Paul Singer’s Elliott Advisors has also been busy poking their noses in to Whitbread’s affairs, insisting that splitting Costa Coffee from Premier Inns and other assets will enhance shareholder value. No doubt, Alison Brittain the CEO will update us with results on Wednesday if not before.  No one quite understood why Allergan wanted to spoil Shire’s party by feebly talking about trumping Takeda’s bid. Anyway, Allergan went to ground very quickly, and Shire and Takeda will continue their talks.

 

Back here in Old Blighty, JD Sports posted stellar numbers with profits up 24%. AB Foods on the back of Primark’s efforts also did well in a difficult retail environment. Greene King, the brewer and restaurateur, which had previously dipped in to the doldrums, also pleased its shareholders allowing its shares to bounce by 7%. Debenhams posted a nightmare set of results with sales down over 2% resulting in profits falling 84% to £13 million for the last trading period.

 

The earning season in the US was, to all intents and purposes, positive with decent numbers from Bank of America, Proctor & Gamble, Goldman Sachs, Morgan Stanley and surprisingly the dog in the pack GE (shares initially +7%). IBM’S efforts did not pass muster and the shares fell 5%. Netflix’s achievements were outstanding with 1.3 million extra subscribers in US and 5.4 million globally with record revenues of $3.4 billion. The outlook was excellent.

 

So, despite all the machinations markets in Europe made measurable gains. The same cannot be said for the US and Asia. The Dollar affected some earnings in the US, with tech stocks towards the end of the week under pressure, especially Apple. So far 87% of S&P 500 companies have posted their results and 79.3% have beaten expectation. Despite China’s GDP coming in at 6.8%, Asia was experiencing FX volatility and Central banking influence being brought to bear. Tokyo was the exception to the rule. As you can be see, set out below is a massive earnings week on both sides of the Atlantic.  In London, great attention will be paid to bank earnings, especially Barclays and RBS. Also, UBS, Deutsche Bank report on Monday, with UBS and Credit Suisse stepping up to the plate on Friday. All three are in recovery mode. Metro Bank’s Chairman Vernon Hill is coming under extreme pressure over expenses – shareholders believe a conflict of interest. Star the Canadian ‘on-line’ gaming magnate have bid £3.36 billion for Sky Bet, 70% owned by CVC Capital. Making the largest gaming group in the world. 

 

INDEX

16/4/18

20/4/18

% gain/loss

FTSE 100

7264

7368

+1.40%

XETRA-DAX

12478

12540

+0.5%

CAC40

5314

5412

+1.8%

DJIA

24582

24462

-0.49%

S&P 500

2676

2670

-0.2%

NASDAQ

7179

7146

-0.46%

Hang Seng

30849

30418

-1.40%

Nikkei

21843

22162

+1.46%

Shanghai Comp

3152

3071

-0.6%

 

UK companies posting results this week – Tuesday - AA, LSE, St James’s Place, Wednesday – Boohoo, Whitbread, Fenner, Antofagasta, Cromarty’s International, Fresnilloo, GSK, Lloyds Banking Group, Metro Bank, Persimmon, Tullow Oil, Thursday - Capita, Barclays Bank, Cobham, Elementis, Hastings, Kaz Minerals, Meggitt, Royal Dutch Shell, Shire, Taylor Wimpey, Weir, Friday - RBS, Virgin Money, Computacenter, Merlin Entertainment, Rotork, Travis Perkins,

 

US companies posting results this week – Monday - Halliburton, Tuesday - Caterpillar, Coca-Cola, United Technologies, Lockheed Martin, 3MS, Biogen, Freeport-McMoRan, Pulte, Amgen, Texas Instruments, Wynn Resorts, Wednesday - Boston Scientific, NASDAQ, Boeing, Northrop Grumman, Comcast, Viacom, Twitter, Facebook, Visa, AT&T, eBay, Ford Motor, PayPal, Thursday - Zimmer, PepsiCo, Altria, Raytheon, Valero Energy, Conoco-Phillips, Hershey, DR Horton, Abbvie, GM, Amazon, Microsoft, Starbucks, Mattel, Friday - Chevron, Exxon Mobil

 

Economic data posted this week – Monday - US PMI survey, Tuesday - UK PSBR UK CBI Industrial trends, Thursday - UK loans and housing data, US Durable Goods, Friday -UK GDP, US GDP, UK GSK Consumer Confidence

 

David Buik  

Core Spreads

Core Spreads is financial trading as it should be. No noise – just tight spreads on thousands of markets.

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