“LOVE lives beyond the tomb
And earth, which fades like dew:
I love the fond,
The faithful, and the true.

Love lives in sleep:
’Tis happiness of healthy dreams;
Eve’s dews may weep,
But love delightful seems.

’Tis seen in flowers,
And in the morning’s pearly dew;
In earth’s green bowers,
And in the heaven’s eternal blue.

’Tis heard in Spring;
When light and sunbeams, warm and kind,
On angel’s wing
Bring love and music to the mind.

And where ’s the voice
So young, so beautiful, and sweet,
As Nature’s choice
Where Spring and lovers meet?

Love lives beyond the tomb
And earth, which fades like dew:
I love the fond,
The faithful, and the true.”


John Clare – Poet – 1793-1864

 

Towards the second week in April the sporting calendar starts to come in its spring coat with US Masters’ Golf, the Grand National and the latter stages of our domestic football season entering the final stages, as does the Champions league tournament. Of course, it would folly to forget the IPL, which is now a ‘red letter’ competition to savour. I still experience the same tingling feeling of excitement as I did sixty years ago.  Starting with Aintree next week, could it be ‘Anibale Fly’ or ‘Total Recall’ both at about 12/1 or ‘Tiger Roll’ at 14/1 or an outsider like ‘Regal Encore’ at 33/1.  If the latter bothers to turn up, he certainly has the ability – who knows? In the Champions League, Manchester City have made life very difficult for themselves, losing 0-3 to Liverpool at Anfield. What a wonder ‘bicycle-kick’ goal Ronaldo scored against Juve! Also, Man City losing at home to United 2-3 was also unexpected. As I write this week’s piece, the outcome to the US Masters’ golf was initially always going to be difficult to predict - but what astonishing golf! However by the last round, it was hard to see another winner apart from Patrick Reed, though Rory McIlroy pushed him most of the way, with Ricky Fowler and Jordan Spieth finishing under a wet sail!

 

INDEX

29/3/18

6/4/18

% gain/loss

FTSE 100

7044

7183

+1.97%

XETRA-DAX

11956

12241

+2.4%

CAC40

5152

5258

+2.1%

DJIA

23949

23932

-0.01%

 

 

 

 

S&P 500

2614

2604

-0.3%

NASDAQ

6984

6915

-0.9%

Hang Seng

30510

29844

-2.2%

Nikkei225

21441*

21567

+0.6%

Shanghai Composite

3127

3131

+0.1%

 

 

 

 

 

 

Denotes from 2/4/18

 

INDEX

29/12/17

6/4/18

% gain/loss

FTSE 100

7687

7183

-6.6%

XETRA-DAX

12917

12241

-5.2%

CAC40

5312

5258

-1.1%

DJIA

24719

23932

-3.2%

S&P 500

2673

2604

-2.6%

NASDAQ

6903

6915

+0.2%

Hang Seng

29919

29844

-0.3%

Nikkei

22764

21567

-5.3%

Shanghai Comp

3307

3131

-5.3%

 

Again, the global political agenda dominated international equity bourses last week. President Trump seems not content to just throw a pebble in to a pond to get a reaction to his proposed policies. No, it must be a boulder to send out seismic waves of concern and uncertainty. So, it was hardly surprising that China reacted adversely to Trump’s proposed trade tariffs by returning their imposed tariffs with interest. Then we saw some conflicting placatory comments on Wednesday from the White House, which calmed frayed nerves. By Thursday night POTUS raised his game with more trade tariff threats, which sent Beijing in to overdrive with even greater retaliatory measures. As I said last week, in observing global markets for over 50 years, I have never seen greater intraday volatility such as has been experienced by the DJIA in recent weeks, with close to 1000 points turn around in a day, not uncommon. This is all caused by fear of the unknown. We can only hope that all these threats are only jingoistic nonsense and that once all the huffing and puffing has abated, good sense will prevail. If not, the world’s trade will be severely damaged at enormous cost.

 

There is little doubt that China has behaved badly over trade arrangements for some years. Nonetheless a sensible resolution to this spat is a prerequisite. I am less than convinced that US Treasury Secretary Steve Mnuchin’s intemperate and injudicious comments on the threat of a trade war being a reality, was helpful.  It certainly wasn’t to Wall Street’s plight on Friday, with the DJIA falling by 700 points, though finishing just 572 points down on the session. Many like me felt that Mnuchin probably did not care as he has made his pile at Goldman and as a successful film producer. My former colleague and still great friend Simon French at Panmure Gordon made the salient comment “If you are going to use tariffs as credible threat to bring China to the table then your rhetoric needs to be convincing. If Beijing think the US is bluffing it hasn’t got any chance of working (note I don’t think the chances are that high to start with). Mnuchin was on the money!” I have my doubts that diplomacy should be conducted on social media, Fox or NBC. Simon would argue that Trump has tried the diplomatic route and it has failed abjectly.  It’s time to try a harder line! I sincerely hope that the EU is observing the dangers of an unnecessary trade war.

 

Friday’s rather disappointing non-farm payroll data paled in to insignificance in comparison to Trump’s trade tariff war and was drowned in the morass of Mnuchin’s jingoism towards China. Only 103k jobs were created in March – a third of what was created in February. The unemployment rate remained at 4.1%, when consensus expected a pip drop.  However, wage inflation rose by 0.3%, which is likely to carry on encouraging the FED with its gentle rate increase policy.

 

At the end of this coming week, the earnings season gets under way with Blackrock and Costco reporting on Thursday and JP Morgan and Wells Fargo stepping up to the plate on Friday.  It is hoped that the earnings season will be positive, thus alleviating concern and uncertainty over trade tariffs, which has put markets on the back foot. However last week was the third week running that investors were deserting US equity markets for emerging market risk to the tune of $38 billion.

 

On Tuesday Spotify  finished its long-awaited “direct listing” experiment. The music streaming company went public without the IPO. After completing its first trade halfway through the session at $165.90, Spotify fell to $149.01, 10 percent beneath the open. Despite adverse market conditions, Spotify was valued at $26.5 billion.  The shares ended the week at $142, which considering the level of uncertainty and volatility was satisfactory.

The top end of the recent range of $132, was used as a “reference point,” valuing the company at $23.5 billion. Because there was no IPO price, that demarcation is being used to say that Spotify traded up about 13 percent on its first day. Morgan Stanley, Goldman Sachs and Allen & Co were advisors to this tech giant.

On the domestic front, it looks as though Disney will be the eventual owners of Sky News, which may allow 21st Century to complete its 61% purchase of Sky before selling on key assets to Disney – all being well. De La Rue’s failure to land the UK passport contract has been met with a wave of criticism. Its uncompetitive bid in comparison to the Franco-Dutch Gemalto group seems to be irrelevant. I suspect we have not heard the last of this issue – De La Rue lost 6% in share value.  Executive pay also hit the headlines with Persimmon’s Jeff Fairbairn, Reckitt’s Rakesh Kapoor, the Pru’s Mike Wells and BP’S Robert Dudley, all under the cosh to cut their pots of gold. The UK retail sector is enjoying a very bad trading period. This week Mothercare and Card Factory are expected to endorse that trend, though Tesco’s improvement is expected to continue. Food inflation is coming down, so any increase beyond May’s 25 basis point expected hike is unlikely. Tesco may post profits up 60% to £1.6 billion. We shall see.

 

WPP’S Sir Martin Sorrell has his work cut out, as he vigorously defends his reputation against allegations of financial impropriety by enlisting the help of the very best legal advice money can buy. The 73-year-old PR and advertising veteran, who started WPP in 1986 has been at the heartbeat of this astonishingly effective global media mogul. This investigative process could be damaging for WPP, whose share price has already fallen 40% in the last year, though hardly at all in the last week. Last year WPP invoiced £15 billion of services and made a profit of £2 billion. Whatever the outcome WPP will be overhauled.

 

UK companies posting results this week – Monday – Centamin, Tuesday – Card Factory, Eddie Stobart, Hostelworld, Robert Walters, Wednesday – McCarthy & Stone, Tesco, ASOS, PageGroup, Vedanta Resources, Thursday – WH Smith, Man Group, Saga, Dunelm, Greene King, PZ Cussons, Mothercare

 

US companies posting results this week – Thursday – Costco, Blackrock, L-Brands, Delta, Friday – Wells Fargo, JP Morgan, PNC Financial Services

 

 

Economic data posted this week – Monday – Halifax House Price Index, Tuesday – BRC Sales, US PPI, Wednesday – UK Manufacturing & Industrial Output, US CPI, US FOMC minutes, UK NIESR GDP, Thursday – BOE Credit Conditions, US Import Export Price Index

 

 

 

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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