“You did not walk with me
Of late to the hill-top tree
By the gated ways,
As in earlier days;
You were weak and lame,
So you never came,
And I went alone, and I did not mind,
Not thinking of you as left behind.

I walked up there to-day
Just in the former way;
Surveyed around
The familiar ground
By myself again:
What difference, then?
Only that underlying sense
Of the look of a room on returning thence.

 

Thomas Hardy – poet and author – 1840-1928

 

Stephen Smith, the former Australia cricket captain and disputably the finest batsmen playing until last week, looked a broken man at his press conference over the ‘ball-tampering’ saga. I totally concur with Times’s Matthew Syed article on Good Friday. Enough is enough. This was ball tampering not murder. The public have enjoyed their emotional blood-letting at the caustic attitude adopted by this current Australian cricket team, resulting in draconian suspensions of the duplicitous Smith, the unattractive Warner and the naively weak Bancroft. Let’s move on!

 

March, normally a decent month for equities, was a dispiriting one this year. The downturn of global indices was attributed to President Trump’s persistently jingoistic attitude to trade tariffs and a realisation that the tech sector, which had two strident issues, which also gave cause for concern - valuation and corporate governance. The NASDAQ’S correction was highlighted by Facebook’s lack of responsibility in protecting data. Also, in the case of Amazon, Trump was becoming increasingly irritated with the lack of tax contribution from the e-commerce Titan.

 

On Monday and Tuesday last week the ‘heavy tech brigade’ came in for some very heavy treatment and the likes of Amazon, Alphabet, Netflix, Microsoft and Facebook losing more than an average of 5%. However, by the end of the week, many had recovered some poise, apart from Amazon down 5.9% on the week and Tesla down 14% (part courtesy of car death).  Last week’s machinations saw Alphabet was down 1.4%, Facebook -3.6%, Netflix -3.9% and Microsoft -2.2%.  In 50 years of observing markets, rarely have I witnessed such seismic levels of daily volatility.  The analogy would be dealers running around like headless chickens.  Spotify’s $20 billion IPO due this Tuesday is hardly ideal timing, with so much uncertainty prevailing. China announced tariffs of up to 25% on 128 US products, measures which match a list of potential tariffs on up to $3 billion worth of US goods which was published in China last month. This could be bad news for US farmers and companies like Walmart. Wall Street expressed its displeasure yesterday with a sharp ‘sell-off’ of circa 2.5%, with Amazon severely under the cosh – down 5.2%!

 

On the economic front US GDP increased at an annual rate of 2.9% in the fourth quarter of 2017, with the 3rd quarter being increased to 3.2%.

 

 

INDEX

23/3/18

29/3/18

% gain/loss

FTSE 100

6909

7056

-2.1%

XETRA-DAX

11886

12096

+1.7%

CAC40

5075

5167

+1.8%

DJIA

23533

24157

+2.7%

S&P 500

2588

2641

+2%

NASDAQ

6994

7063

+0.99%

Hang Seng

30297

30093

-0.7%

Nikkei225

20605

21159

+2.7%

Shanghai Composite

3151

3160

+0.3%

 

 

 

 

 

INDEX

28/2/18

29/3/18

% gain/loss

FTSE 100

7175

7056

-1.6%

XETRA-DAX

12435

12096

-2.7%

CAC40

5262

5167

-1.8%

DJIA

25029

24157

-3.4%

S&P 500

2713

2641

-2.7%

NASDAQ

7273

7063

-2.9%

Hang Seng

31044

30093

-2.3%

Nikkei

22068

21159

-4.2%

Shanghai Comp

3273

3160

-3.3%

 

 

Here in Old Blighty, again it was not a happy week, with the FTSE 100 dipping below the record close for December 1999. The retail sector continued to be under the cosh, with House of Fraser, New Look, Homebase, Jigsaw and Moss Bros adding to the existing concern of the High Street. Also, with Pound looking quite perky above the $1.40 level, mining stocks seemed to lose some of its glister. The UK’S GDP grew slower than any other EU country - steady at 0.4% in the fourth quarter, same as that seen in the previous readout. The annualized reading is also expected to show that the pace of expansion slowed down to 1.4% in Q4 versus 1.5% seen in the previous quarter. The marginally disappointing effort was way above the recession level forecasted by Project Fear. Such a pity the country could not have been more united in working together for the common cause. This has clearly had a negative effect on investment and planning, as has the government’s lack of preparation for the negotiation talks, if one can call them that, with the EU.

 

Despite the rather anaemic sentiment that prevailed, there was plenty of M&A activity to peruse over. GSK’s new CEO Emma Walmsley left her stamp on her first significant M&A initiative, in agreeing to buy Novartis’s healthcare division for $13 billion.

  

Also, after a rather nasty visceral and hostile bid for GKN, lasting over the last few months, Melrose, the most persistent of predators managed to persuade just over 52% of GKN’S shareholders to back the £8 billion takeover. However, the bid is far from done and dusted. Had GKN’S management done more to deliver shareholder value over the years, this part aerospace part car part engineer, employing 60k people world-wide and 6k here in the UK, would never have been put in this invidious position.

 

So, on the face of it Chairman Mike Turner (ex BAE Systems) and CEO Anne Stevens may have to bow to pressure and eventually move on. The prospect of GKN being given the opportunity of splitting the operation looks remote to many observers. The Unions, the staff and some politicians are up in arms at the prospect of this successful ‘asset stripper’ landing the spoils of war, despite Melrose insisting that jobs will be ‘secure’ and that head-office will remain in the UK. The Melrose management event went out of their way to reassure AIRBUS, an important client of GKN, that there were long term plans in place for the aerospace operations. Whether Melrose was believed or not remains to be seen.

 

Business Secretary Greg Clark, who in my humble opinion announced his inquiry rather too late, is aware of the concern expressed by Lord Heseltine most vociferously on Saturday’s BBC ‘Today’ programme and those of many others. I think I can dispel their concerns for two reasons - firstly the security issue and secondly who will Melrose eventually sell on to? I think the reasons are as follows. GKN is being sold to a UK operation, not an overseas company over whom there would be no control. Secondly, when GKN has been hospitalised, sharpened up and eventually ready to be re-sold, the Government of the day can intervene preventing a sale to an undesirable predator. As an illustration as to how GKN were under-valued as well under-performing, its share price since the beginning of the year has risen from 317p to 450p -up 42%!

 

There seems to have been no resistance to CME’S bid for NEX. Both parties appear to have been talking for some time and have agreed a £10 a share deal valuing NEX at £3.8 billion. NEX provides perfect synergy with CME offering the best tech driven IDB for the global bond market, with prowess for the massive US Treasury market. Many will be pleased that there will be a place on CME’S board for Michael Spencer. Since the start of 2018 NEX’S share price is up from 601p to 981p - up circa 55%.

 

Other M&A news includes and early conversation that Takeda, the Japanese drug Titan, has had with Shire of Ireland, though quoted in London about a possible takeover. Shares drifted from 3892p in January to 2953p in late March back up to 3570p on Thursday. Again, this liaison from a biotech perspective makes sense, though some investors believe that Takeda is a suitable bedfellow. Conviviality, owners of cheap booze are under the cosh and may call in the administrator - very short of cash and with a £30 million tax liability. Now that Barclays has settled its US $2.2 billion lawsuit, CEO Jes Staley may be looking to return money to shareholders, though Barclays’ fresh 5.2% stakeholder, Edward Bramson, will be breathing down his neck, looking for a good reason why the bank could not be broken up.

 

UK companies posting results this week – Tuesday – BTG, Thursday – Electrocomponents, Ferrexpo, Hammerson

 

US companies posting results this week – Wednesday – MaxCyte, Acuity Brands, Thursday - PriceSmart

 

Economic data posted this week – Tuesday – UK PMI, US PMI, US ISM       Manufacturing, Wednesday – UK PMI Construction, US ADP Employment index, US PMI Services and Factory Orders, US ISM Non-Manufacturing – Thursday – UK New car registration, UK PMI Services, US trade balance and Labour statistics, Friday – Non Farm Payrolls (+225k) & employment data (employment rate 4.1%)

 

David Buik  

Core Spreads

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

uk forex awards 2017