“It is eighteen years ago, almost to the day –

A sunny day with leaves just turning,

The touch-lines new-ruled – since I watched you play

Your first game of football, then, like a satellite

Wrenched from its orbit, go drifting away

 

Behind a scatter of boys. I can see

You walking away from me towards the school

With the pathos of a half-fledged thing set free

Into a wilderness, the gait of one

Who finds no path where the path should be?

 

That hesitant figure, eddying away

Like a winged seed loosened from its parent stem,

Has something I never quite grasp to convey

About nature’s give-and-take – the small, the scorching

Ordeals which fire one’s irresolute clay.

 

I have had worse partings, but none that so

Gnaws at my mind still. Perhaps it is roughly

Saying what God alone could perfectly show –

How selfhood begins with a walking away,

And love is proved in the letting go.”

 

Cecil Day-Lewis – author & poet – 1904-1972

 

There is no doubt that the world is in turmoil, with copious horrific acts of barbarism appearing as headlines, day after day and with political and social unrest at dangerous levels. Against that unappetising background, how fantastic it was to be able to enjoy the Royal Wedding!

An occasion of this nature the U.K. is seen at its very best with a level of pageantry unparalleled anywhere in the world.  This magnificent occasion created a fantastic ‘feel good factor’, which hopefully will put the ‘doom & gloom mob’ and the ‘Project Fear wallas’ temporarily to the sword. Maybe this glorious event will prove to be the pivotal moment when the economy, with the sun high on the yardarm, starts to select another modest gear!



INDEX

14/5/18

18/5//18

Another astonishing % gain/loss

FTSE 100

7724

7778

+0.70

XETRA-DAX

13099

13077

-0.17%

CAC40

5539

5614

+1.35%

DJIA

24879

24715

-0.66%

S&P 500

2733

2713

-0.73%

NASDAQ

7429

7354

-1.30%

Hang Seng

31498

31047

-1.01%

Nikkei

22705

22930

+0.99%

Shanghai Comp

3167

3193

+0.82%

 

In terms of performance last week, global indices posted a bit of a mixed bag.  US markets tended to concern themselves with imponderables and a possible resolution to the Sino/US trade talks. Over the weekend it transpired that China is likely to increase its purchase of American goods and services with a view to reducing the multibillion-dollar trade imbalance with the United States. It is possible that China will consider making $200 billion of additional purchases from the US, but the possible agreement was very short on detail. The US economy is not exactly in overdrive, but market activists are resigned to the fact that rates will increase in the next couple of years, with 10-year Treasury yields bursting through the 3% threshold to 3.15%, dragging the yields of most other bond markets up with them in sympathy. 

 

The Dollar remained relatively strong and investors consequently became nervous about any possible over-exposure to emerging markets. Gold drifted quite sharply below the $1300 threshold to $1285 an ounce. Oil briefly nudged $80 a barrel, which could have a damaging effect on inflation. The FTSE 100 reached record levels with oil, mining and banks quietly gaining in value and despite dangerously frustrating inactivity over the BREXIT negotiations. Tokyo played catch up after its holiday period, with Chinese markets expressing a similar level of neurosis as the US ones. In mainland Europe, Italy grabbed most of the interesting headlines thanks to a right of centre anti-EU coalition likely to form the next administration. Italian assets expressed signs of anxiety and dipped, though they did not sink without trace.

Wall Street saw ‘key’ retail operators post numbers. Walmart saw its share price drop 10% in value in February 2018, due to a profits warning.  However, Thursday’s results were encouraging with revenues coming in at a gargantuan $122 billion for the first quarter with sales up 2.1% and overseas sales up 11.7% and eps beating expectations at $1.14 a share. But ‘after hours’ Walmart’s shares were down 1%. Campbell Soups’ earnings did not pass muster on Friday and its shares crashed by 11% on a profit’s warning. Blackstone decided to ‘bin’ its last 5.3% holding in Hilton Hotels.

Here in the UK last week, we were subjected to news that was ‘good, bad and ugly!’ Empl0yment data and wage inflation qualified as good and positive for equity markets, despite disappointing housing data. Bad news was inflicted on the bookmakers when the Government served notice to drop the maximum stake on FOBT from £100 to £2 with approval on both sides of the House.  It will have negative business ramifications with the potential loss of 20k jobs and conceivably as much as £400m annual revenue for the Treasury.  A day or two before this not wholly unexpected news came agreed proposals to change the betting license laws in the US, which added measurable value (between 8% and 12% to Wm Hill, GVC (the owners of Ladbrokes Coral) and Paddy Power Betfair. Personally speaking, I would not be too optimistic as to the benefits, even though the US betting black market is reputed to be worth as much as $400 billion. It seems inconceivable to me that the US will surrender market share to ‘Limey Mavericks!’ I suspect the likes of William Hill may be more vulnerable to a takeover by MGM or Caesars, despite Hills and Paddy Power having the foresight to build a presence in Nevada and California respectively. Further good news came from Ocado, which agreed a deal with the US’S Kroger, which resulted in it shares leaping by 40% on Thursday. Most market watchers were expecting some sort of deal with Metro or Carrefour, but this innovation was perceived as far more beneficial and valuable. 

Burberry, under new management of Marco Gobbetti, posted encouraging numbers. After a decade in the hot-seat Vodafone will be saying goodbye to Vittorio Colao as CEO to be replaced by CFO Nick Read. Vodafone’s share price has been trading water for 5 years and it is time for a change. The sale of Vodafone’s stake in Verizon should have been burning a hole in its pocket and Europe’s largest mobile operator’s efforts to get in to media appear anaemic at best. Astra Zeneca’s numbers on Friday were disappointing and CEO M Soirot’s £9.3 million remuneration package will not be popular with the market. Lidl plans on opening many more stores as well as offering a delivery service. This German operator and its fellow conspirator will relish taking on Tesco and Sainsbury/ASDA in their own backyard. On Wednesday M&S posts its latest set of numbers. This high street mogul may serve notice to close between 60 and 100 outlets. Like for like merchandise sales may have dropped by 1.2% in the last quarter and food by 0.2%. CEO Steve Rowe and chairman Archie Norman are discussing the possibility of Dixons’ Katie Bickerstaff becoming a non-executive director. M&S’S share price hit 731p in May 2007 under Lord Stuart Rose. Now it stands at 291p – 45% below where it was 2 years ago when Rower became CEO. M&S is in danger of coming out of the FTSE 100 and is the target of some hedge funds.  There has also been dispiriting news on the wires that Mothercare and House of Fraser will need to make cuts, close stores, implement redundancies and seek financial help to balance their respective books.

The ugly news came from the findings on the collapse of Carillion with the management appearing to be very much to blame, though the accounting and legal professions did not come out of this disaster smelling of violets.  chairman Philip Green, former chief executives Richard Howson, Keith Cochrane, Ricard Adam and a second former finance director, Zafar Khan, were castigated and vilified for their role in the demise of this company. Greed and incompetence at pricing these large government contracts will see thousands lose their jobs as well as a delay in competing these projects.  Surely some heads will have to roll? The government also did not win too many prizes for it role in this tawdry affair.

 

UK companies posting results this week – Tuesday – Homeserve, Shaftesbury, Big Yellow, Bloomsbury Publishing, International Game Technology, NEX, Pets at Home, Halfords, Entertainment One, Cranswick, Glencore, Wednesday – M&S, Severn Trent, Softcat, Assura, Dairy Crest, Great Portland Estates, Vedanta Resources, Babcock International, Thursday – Kingfisher, TalkTalk, Intertek, Electrocomponents, PayPoint, Tate & Lyle, United Utilities, Wizz Air, Paragon, Go-Ahead, Inchcape, Friday – Pennon, SSE, Spectris

 

US companies posting results this week – Monday – America’s Car-Mart, Pure Storage, Tuesday – Toll Bros, Urban Outfitters, Hewlett-Packard Enterprises, Wednesday – Ralph Lauren, Tiffany’s, Target, L-Brands, Thursday – Stage Stores, Best Buy, Ross Stores, Gap, Friday – Foot Locker

 

Economic data posted this week – Tuesday – UK PSBR, Wednesday – FOMC Meeting, UK Inflation Data, US PMI Survey, Thursday – UK Retail Sales, Friday – UK GDP estimate

 

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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