“I wish I could remember that first day,

First hour, first moment of your meeting me,

If bright or dim the season, it might be

Summer or Winter for aught I can say;

So unrecorded did it slip away,

So blind was I to see and to foresee,

So dull to mark the budding of my tree

That would not blossom yet for many a May.

If only I could recollect it, such

A day of days! I let it come and go

As traceless as a thaw of bygone snow;

It seemed to mean so little, meant so much;

If only now I could recall that touch,

First touch of hand in hand – Did one but know!”

 

Christina Rossetti – poet – 1830-1894

 

Didn’t the Rowley Mile course at Newmarket look a picture this weekend? Coolmore’s ‘Saxon Warrior’ was a powerful winner of the 2000 Guineas, but this huge beast, the son of ‘Deep Impact’, looked much more of a Derby horse than a miler. Certainly, the bookies think so; few of them are offering more than even money for the Epsom classic and I doubt there would be generous odds for the Triple Crown, if Aiden O’Brien goes for that route. I suspect O’Brien may want to keep his options open for the ‘Arc’ though ‘Cracksman’ and possibly ‘Enable’, were she to recover from injury in time, could be the real deal.

Good to see the Hannon yard land the spoils in the Guineas with ‘Billesdon Brook’ at generous odds of 66/1 with Sean Levey in the plate! She was the longest priced winner in over 200 years of history for this classic mile race for fillies!

 

As can been see in the table set out below, the performances of many of the global indices last week were at variance for differing reasons. The US was embroiled in bellicose trade talks with China, with Treasury secretary Steve Mnuchin doing Trump’s bidding in Beijing.  The uncertainty caused investors to take some risk off the table at the beginning of last week. However, towards the end of the week the outcome of these deliberations remained inconclusive.  Friday, however, was a good day, thanks to some degree to Non-Farm Payrolls data. The job creation number of 164k was a little below forecast of 193k, BUT the unemployment rate dropped to 3.9% from 4.1%.  The hourly wage inflation was a pip blow expectation at 2.6%.

 

INDEX

30/4/18

4/5//18

Another astonishing % gain/loss

FTSE 100

7502

7567

+0.87%

XETRA-DAX

12572

12820

+1.97%

CAC40

5454

5516

+1.14%

DJIA

24410

24262

-0.60%

S&P 500

2675

2663

-0.44%

NASDAQ

7133

7209

+1.06%

Hang Seng

30300

29926

-1.23%

Nikkei#

22119

22473

+1.60%

Shanghai Comp

3120

3091

-0.93%

 

# Japanese holidays 25/4/18

 

Broadly speaking, earnings posted in the US last week were very positive with Apple excelling with outstanding sales of 61m iPhones, a profit for the quarter of $13.8 billion and a return to shareholders in a whopping $100 billion share buy-back. Apple was really the standard bearer for the resurgence of the NASDAQ last week, whose performance was at odds with the rest of the Street of Dreams. Tesla’s efforts did not pass muster with its shares falling 9%, exacerbated by unnecessarily uncomplimentary and injudicious comments made by Elon Musk to an analyst he was frustrated with. These shares recovered by 3.3% on Friday. Pfizer and Merck both posted encouraging numbers, but investors seemed underwhelmed, even though the drug sector took some stick early last week. Equity markets and especially bond markets took the ‘no change’ message from the FOMC on Wednesday in their stride, with Inflation remaining relatively benign at the FED’S guideline of near 2%.

 

The economic news last week here in Old Blighty was less than encouraging following in the wake of poor GDP data last quarter of +0.1% much of it down to inclement winter weather. Retail sales in April fell sharply by 3.8% again the weather probably playing a matinee idol role. What was disappointing was the PMI service sector data - the backbone of the U.K. economy. How the ‘Remainers’ and their supporting newspapers salivated at the economy’s discomfort. When the sun is high over the yardarm the country’s fortunes will hopefully improve. We shall see. At least the data is probably weak enough for the MPC to keep rates on hold. Just under 3 weeks ago economists felt there was a 73% chance of a hike this coming week.  Now it is a 4% chance. It is also feared that the BOE will drop GDP forecast from 1.8% to 1.5% for 2018. It was interesting to note that business confidence in Germany dropped to its lowest level for eighteen months. Congratulations to Greece for getting its unemployment rate down from 28% to 21%. This year its GDP is scheduled to come in at 2.3% and 2.5% next year. Mind you after 8 years of recession Greece’s growth rate fell by 25%. The EU and the IMF are both smiling like Cheshire cats, but average pay has fallen from £16300 to £12000 per annum since 2010. So, it’s not all violets and roses!

 

European banking results grabbed a few headlines. Standard Chartered Bank continued its recovery process under Bill Winters’s stewardship. In just over 2 years Standard’s shares have rallied from 430p to 750p. HSBC’s effort slightly disappointed with a 3% drop in pre-tax profits. HSBC has a new team in place with Mark Tucker as Chairman and John Flint taking over the reins from Stuart Gulliver as CEO. Now that their misdemeanours are hopefully now behind the ‘local bank’, expectations are high. Societe Generale and BNP Paribas both posted disappointing results; both highlighting that they, in concert with others, had surrendered ground to US competitors, especially in the field of investment banking.

 

 

BP at last posted some good numbers that were not tainted by the US Deep Water Horizon disaster, which has already cost $40 billion.  Also, Rosneft has shown no inclination to pull out of the joint venture with BP, of which the ‘sunflower’ owns 20%. There was also evidence of six fresh exploration plans. Sainsbury’s CEO Mike Coupe will run the joint venture with ASDA. Though Coupe extolled the virtues of the merger, many believe that farmers will feel the wheels of pain on their backs, as prices for their produce get cut. There is a school of thought that believes Aldi and Lidl will benefit from the Sainsbury/ASDA deal.  Virgin Money increased profits but its mortgage book was cut in size. Education publisher Pearson’s efforts were an improvement. 800 jobs were cut from the RBS network, as well as branches being closed. Virgin media will be closing its Swansea operation as the business is rationalised in to four regions from eight.

 

It was rumoured that Amazon ran its ruler over Waitrose, which would have given Amazon some added momentum to add to their association with Morrison. John Lewis chairman, Sir Charlie Mayfield dismissed the idea of a relationship. Mike Ashley of Sports Direct owns 11% of the ailing House of Fraser. It is rumoured that he is threatening to sue HoF for non-disclosure of information, especially in respect of a possible Chinese takeover by Sanpower. This Monday Bloomberg flagged up that Nestle has agreed to enter an alliance with Starbucks to market the coffee chain’s consumer and food-service products globally in a first tie-up of major rivals in the java market. Nestle will pay Starbucks $7.15 billion upfront in cash for a business that has annual sales of $2 billion. With Autonomy’s finance director being found guilty in a US court of cooking the books during HWP’S $11 billion takeover of the UK’S leading software company, this may not augur well for CEO Mike Lynch’s reputation and his £469 million fortune, much of it made from the sale of autonomy.

 

Though markets were closed yesterday in London, Frankfurt DAX (+1%) and Paris (+0.39%) cracked on as did New York (DJIA +0.39%, S&P +0.35%, NASDAQ +0.77%, though not quite so enthusiastically as they did in the morning, thanks to confirmation that President Trump will make his decision on the Iran Nuclear deal today! The Shanghai Composite (+0.91%) and Hang Seng (1.17%) were in ebullient form this morning at 5.45am.

 

UK companies posting results this week – Tuesday – Hiscox, William Hill, GW Pharma, Wednesday – Compass Group, Imperial Brands, Tui, Coca-Cola Bottling, JD Wetherspoon, OneSavings, Provident Financial, G4S, Mylan, Thursday – Next, Vesuvius, ITV, BT Group, Stobart, Barratt Development, Beazley, RSA, William Morrison, Randgold Resources, TP ICAP, Rathbones, Friday – BBA Aviation, 3i Infrastructure

 

US companies posting results this week – Monday – Hertz, Tuesday – Wendy’s, Marriott, Wednesday – Costco, L-Brands, Nvidia, DropBox

 

Economic data posted this week – Tuesday – Halifax House Price Index, Wednesday – BRC Retail Sales, US PPI & Wholesale Inventories, Thursday – UK Trade Balance, UK Construction Output, BOE MPC Meeting, NIESR GDP estimates, US CPI

 

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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