US government opens; Sterling rises despite Brexit uncertainty; High street retailers under pressure.

29 January 2019

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Market news

The FTSE 100 is trading over 100 points higher this morning, up 1.5% and more than reversing yesterday’s sharp losses. European equity markets are also mostly higher, despite losses in Asia and on Wall Street overnight.

There is global focus on high-level trade talks between the US and China taking place tomorrow. Trump is under pressure to strike a deal, but the White House filed criminal charges against Huawei, the Chinese technology giant, for stealing trade secrets and violating sanctions against Iran. Investors hope the talks can still turn a temporary truce into a permanent agreement.

Despite official figures showing that China’s GDP slowdown is being carefully controlled as promised, sentiment soured yesterday after two American companies with significant business in China warned of deteriorating outlooks for its economy.

Last week, equity markets were mixed. The US government reopened after its longest-ever shutdown and there was a strong start to Q4 earnings, with three-quarters of US companies surprising to the upside, but disappointing global data relating to growth, trade and sentiment.

Sterling rose against the dollar last week in spite of the uncertainty surrounding Brexit progress, as speculators deemed that Prime Minister Theresa May’s waning authority might lead to a softer Brexit and a potential extension of the negotiating timeframe. Yesterday, the European Research Group refused to back an amendment that could have saved May’s deal and failure in the vote tonight could lead to parliament effectively taking control of Brexit.

It has emerged this morning that hard-line Brexit and Remain supporters within the Conservative party have privately reached a compromise. Leaks suggest that it includes a longer transition period and replaces the Irish backstop with a “safety net” that is more palatable to Brexiteers.

Oil, meanwhile, has benefitted this month from a weaker dollar and the prospect of Chinese fiscal stimulus, leaving Brent crude oil back above $60 a barrel today. Sanctions placed on Venezuela have also applied supply-side pressure.

Economic data*

Share	Closing Values at 14/1/19	Year high	Year low
FTSE 100	6,747	7,904	6,537
FTSEurofirst	1,391	1,575	1,291
DAX	11,210	13,370	10,279
DJ Industrial Average	24,528	26,952	21,713
S&P 500	2,644	2,931	2,351
NASDAQ	7,086	8,133	6,190
Hang Seng	27,5	33,054	24,541

 

UK Gifts	% Yield	Price
10 Year	1.32	102.74
2 Year	0.79	101.80
5 Year	0.95	99.10
30 Year	1.83	92.62

 

FOREX versus US Dollar	Last	% Change**
British Pound	1.29	0.04
Euro	1.14	0.08
Japanese Yen	109.34	0.05
Canadian Dollar	1.33	-0.04

 

Commodities	Price (USD)	Change**	% Change**
Brent Crude Oil	59.93	-0.44	0.73
Light Crude	51.99	-0.39	0.75
Gold LBMA	1,303.46	4.02	0.31

* Source: Thomson Reuters

** From previous day close

 

Stock focus

A bleak few days for the UK retail industry have put thousands of jobs at risk. Yesterday, Tesco confirmed that it is cutting 9,000 jobs in its stores, with fresh food counters being removed from some locations. The supermarket said that customers are visiting the counters less frequently because they have less time to shop.

It also emerged yesterday that the owner of the Oddbins off-licence chain is on the verge of collapse. Oddbins has collapsed once already, under previous ownership in 2011. European Food Brokers, the parent company, has blamed tough high-street conditions and Brexit uncertainty.

Meanwhile Paperchase is being offered to potential buyers as its owner holds talks with landlords. Paperchase has suffered as high-street footfall has declined and The Times reports that, for a number of its stores, it has sent a restructuring proposal suggesting a new rental agreement linked to turnover.

Domino’s Pizza Group, on the other hand, enjoyed strong performance in the UK over Christmas, but had to cut its profit guidance due to weaker performance overseas. UK sales during the Christmas period rose by 5.5% helped by a record day when it sold 12 pizzas a second. International sales fell by 2% in the same period.

Hargreaves Lansdown suffered a 24% drop in new business during the second half of last year, while total assets fell 6% to £85.9bn. Its shares are down c.5% at time of writing, the worst performing in the FTSE 100. It blamed weak investor confidence and market volatility for the downturn.

Ocado’s shares rose yesterday after reports emerged that Marks & Spencer could take over its food delivery services. Shares in M&S also rose, but other rival supermarkets saw prices move in the other direction. M&S currently lacks the delivery network that its major rivals possess.

 

Financial calendar

Date	Category	Country	Event	Reuters poll	Prior estimate
29/01/19	Surveys & Cyclical	France	France-Consumer confidence - Consumer Confidence	88	86
29/01/19	Surveys & Cyclical	United States	United States-Consumer confidence - Consumer Confidence	124.7	128.1
29/01/19	Consumer Sector	Japan	Japan-Retail Sales - Retail Sales YY	0.80%	1.40%
30/01/19	Prices	Germany	Germany-Import Prices - Import Prices YY	2.10%	3.10%
30/01/19	Government Sector	United Kingdom	United Kingdom-Consumer Credit - Mortgage Approvals	63K	63.73K
30/01/19	Surveys & Cyclical	Eurozone	Euro Zone-Sentiment - Consumer Confid. Final	-7.9	-8.3
30/01/19	Prices	Germany	Germany-Inflation Prelim - CPI Prelim YY	1.60%	1.70%
30/01/19	Prices	United States	United States-GDP Advance - Core PCE Prices	1.60%	1.60%
31/01/19	Surveys & Cyclical	United Kingdom	United Kingdom-GfK consumer confidence - GfK Consumer Confidence	-15	-14
31/01/19	Labour Market	Eurozone	Euro Zone-Unemployment - Unemployment Rate	7.90%	7.90%
01/02/19	Surveys & Cyclical	United Kingdom	United Kingdom-PMI Manuf - Markit/CIPS Mfg PMI	53.5	54.2
01/02/19	Labour Market	United States	United States-Employment - Unemployment Rate	3.90%	3.90%

Source: Thomson Reuters

 

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London EC4V 4BJ

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Important information

This publication is intended to be Walker Crips Investment Management’s own commentary on markets. It is not investment research and should not be construed as an offer or solicitation to buy, sell or trade in any of the investments, sectors or asset classes mentioned. The value of any investment and the income arising from it is not guaranteed and can fall as well as rise, so that you may not get back the amount you originally invested. Past performance is not a reliable indicator of future results. Movements in exchange rates can have an adverse effect on the value, price or income of any non-sterling denominated investment. Nothing in this document constitutes advice to undertake a
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