“I speak not, I trace not, I breathe not thy name;
There is grief in the sound, there is guilt in the fame;
But the tear that now burns on my cheek may impart
The deep thoughts that dwell in that silence of heart.
Too brief for our passion, too long for our peace,
Were those hours - can their joy or their bitterness cease?
We repent, we abjure, we will break from our chain, - 
We will part, we will fly to - unite it again!
Oh! thine be the gladness, and mine be the guilt!
Forgive me, adored one! - forsake if thou wilt;
But the heart which is thine shall expire undebased,
And man shall not break it - whatever thou may'st.
And stern to the haughty, but humble to thee,
This soul in its bitterest blackness shall be;
And our days seem as swift, and our moments more sweet,
With thee at my side, than with worlds at our feet.
One sigh of thy sorrow, one look of thy love,
Shall turn me or fix, shall reward or reprove.
And the heartless may wonder at all I resign - 
Thy lips shall reply, not to them, but to mine.”

 

George Gordon, Lord Byron - poet – 1788-1824

The recent film release of “Mary Queen of Scots” is, I believe, Josie Rourke’s first stab as film director, having recently left the Donmar after several very successful seasons. Saoirse Ronan takes the lead role and Margot Robbie plays Queen Elizabeth I. Simon Russell-Beale, amongst others provide great enjoyment for audiences with wonderful cameo parts. I was very grateful for the history lesson refresher. Though the acting was decent, the production was dull and colourless. It is a miserable plot, but the constant grey skies and austere countryside and castles did nothing to lift the spirits of audiences.

 I also took in “Front Runner.” This is an American biographical drama film directed by Jason Reitman, based on the Presidential challenge of Democrat Gary Hart in 1988, whose personal infidelity was exposed, and it subsequently quashed his challenge. The film starred Hugh Jackman in the lead role, with supporting performances of Vera Farmiga, J. K. Simmons, and Alfred Molina. I have been told I made the wrong choice of a US political drama. I should have seen ‘Vice.’ Christian Bale’s portrayal of Dick Cheney was a priceless piece of character acting – shades of Gary Oldman when playing Churchill. Two London lads playing roles, which were a total contrast to their upbringing. Great acting! 

Politically it was an awful week in the UK.  A thumping defeat for Mrs May’s BREXIT BILL by 230 votes and 19-seat margin win for the Government against Jeremy Corbyn’s motion of no confidence in the Government. The deeply divided Conservatives and the 20 DUP members know what a threat to the economy a left-wing Corbyn government could be to the UK’S economy. Also, business, industry and commerce fear a Corbyn Government far more than any fall-out from a ‘hard’ BREXIT.

 The divisions in the House of Commons over BREXIT seem wider than ever. Who knows what will happen? Will Mrs May represent a regurgitated effort of her original proposal or will it have the support of a legal backstop agreement. Maybe revoking Article 50 for a few months followed by a peoples’ vote will provide the solution, with senior MPs having duplicitously rested control for the HoC from a weak government.  I sincerely hope not. That would be undemocratic and inconclusive.

INDEX

14th January 2019

18th January 2019

%Loss/Gain

FTSE

6918

6968

+0.72%

XETRA DAX

10820

11205

+3.56%

CAC 40

4825

4875

+1.04%

DJIA

23880

24706

+3.45%

S&P 500

2580

2670

+3.47%

NASDAQ

6899

7157

+3.73%

HANG SENG

26559

27090

+1.99%

SHANGHAI

2553

2596

+1.68%

NIKKEI 225

20296

20666

+1.82%

Thanks, in the main to some light appearing at the end of the tunnel on the Sino/US trade spat, positive US industrial production data, the price of oil increasing and some decent 1st quarter US earnings, equities girded up their loins last week. Especially those quoted on the Street of Dreams. So far about 140 constituent companies having reported so far.  Of the banks, revenues from Citibank, JP Morgan and Morgan Stanley looked a little light, but earnings per share were achieved apart Morgan Stanley, which missed with EPS of 80 cents rather than 89 cents. A significant drop in earnings from fixed interest trading affected all the trading operations.

Conversely, numbers from Netflix were impressive with 8.8 million subscribers being added in the last quarter – total circa 140 million. $13 billion will be spent on new streamlining. Netflix’s shares, after a torrid run in December rose by 50% to $353, before profit taking on Friday, which saw the price ease by 3.99% to $339. Expect competition from Disney/Warner, Comcast/NBC/Sky in the next two years. Netflix has raised its monthly tariff in the US and rest assured fresh competition will attempt to undermine Netflix’s dominance.

Here in London markets were gripped with BREXIT hysteria and many would have been surprised that the FTSE 100 made any gains at all. Well they did but they were modest.  Sterling’s value is still very influential, with its value increasing over the week by almost two cents, thanks to the market perceiving that a HARD Brexit was unlikely, and that NO BREXIT AT ALL was still an option. This view is supported by Crispin Odey, who believes that Cable could reach $1.40 if there is no BREXIT.

Corporate results were mixed.  Whitbread has had quite a ‘run on the rails’, adding 23% in the last year. Whitbread sold Costa Coffee to Coca-Cola for £3.9 billion and Premier Inn sales were up 2.5% in the last trading period. £500 million will be returned to shareholders. Retail can be bountiful, especially ‘on-line’ as proved by Boohoo, whose sales increased by 44% in the last year with margins in excess of 50%. Boohoo suffered in sympathy with ASOS’s profits warning in November 2018, but the share price is starting to recover. AB Foods’ sugar operation was found wanting, but Primark’s sales were up 2% on a ‘like-for-like’ basis. Some may be disappointed but it should be remembered that Primark’s goods remain cheap but there is no discounting. AB Food’s share price has dropped 23% in the last year.

 

M&S served notice that it will close another 100 outlets, whilst Dunelm posted encouraging trading figures. Overall UK retail sales fell by 0.9% in December, due to the inflated efforts of Black Friday and Cyber-Monday in November. It looks like the last chance saloon for Patisserie Valerie, whose losses, allegedly due to skulduggery, maybe as much as £40 million. If Chairman Luke Johnson and their bankers cannot find the key to the kingdom this coming week, it could be ‘Good Night, Vienna!’ We also hear that Superdry founder Julian Dunkerton may well step back in to the breach to pick up the pieces of this flagging retail brand. It is also thought that Sir Philip Green’s empire has shrunk by about 20%, with 200 stores having been closed in the past 2 years. Finally looking at retail’s problems, it is understood that valuers have been ordered to wake up and review/cut the value of outlets and centres by RICS, in an attempt to save the high street from further doom. Companies such as Hammerson, Intu, British Land and Land Securities could be adversely affected.

Ryanair was confirmed, yet again, as the worst short-haul airline. It also posted another profits warning, with full-year profits now expected to be in a range of €1.0bn to €1.1bn (£880m to £970m), compared with its previous forecast of €1.1bn to €1.2bn. Thanks to excessive capacity, the airlines fares have been cut by 7%, far more than they originally hoped. It was believed that prices would only be cut by 2%. Industrial action by pilots and others has also been a hindrance. Ryanair’s share price has fallen from €16.82 to €9,80 (41%) in the last year. Rakesh Kapoor will soon be leaving as CEO of Reckitt Benckiser having taken no less than £82 million as remuneration out of the ring in recent years. Though the company has done well, no manager deserves that kind of reward. In conclusion this week, China says its economy grew 6.6 percent in 2018. That’s the lowest official pace in 28 years. I suspect, if the truth be told, 4% might be nearer the mark.

 

UK companies posting results and trading statements this week – Monday – Ocado, BHP Billiton, William Hill Tuesday – Dixon Carphone, easyJet, IG Group, Cairn Energy, Close Brothers, easyJet, Pets at Home, Wednesday – Joules, Antofagasta, Brewin Dolphin, Burberry, Computacenter, Great Portland Estates, Fresnillo, JD Wetherspoon, WH Smith, Marston’s Petropavlovsk Thursday – DMGT, Anglo-American, CMC Markets, Countryside Properties, Fever Tree, Kaz Minerals, St James’s Place, Kier Group, Restaurant Group,  Friday – Vodafone, AG Barr, Bonmarche

US companies posting results this week: Tuesday – Johnson & Johnson, Travelers, Wednesday – Procter & Gamble, Abbotts Labs, Xilinx, Ford, Thursday – American Airlines, Freeport McMoRan, JetBlue, Bristol Myers Squibb, Intel, Starbucks, Friday – DR Horton, Colgate-Palmolive

Economic data posted this week: Monday – Rightmove House Prices, Tuesday – UK wage growth, Unemployment and PSBR, US existing Home Loans, Wednesday – CBI Industrial Trends, US Consumer Confidence, Thursday – Us PMI Indices, ECB Monetary Policy, Friday – UK Housing and Finance loans, US Durable Goods and New Home Sales

 

 David Buik  

Core Spreads

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