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14 January 2020
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Global equities have edged higher this week amid a range of factors. Firstly, there has been a partial de-escalation of tensions in Iran, which is on the back foot after mistakenly shooting down a Ukrainian passenger plane. The error has undermined Iran's threats of retaliation towards the US.
Washington, meanwhile, is expecting to host the Chinese Vice Premier on Wednesday in order to sign the key `phase one' trade deal. Alongside yesterday's announcement, the US also removed China from the list of countries which it labels currency manipulators, a sign of diplomatic progress.
Chinese trade data has also boosted investor sentiment, as December's figures proved to be much stronger than expected. Customs exports rose 7.6% (against 2.9% consensus forecast), the first increase since March. Imports rose 16.3%, the best month in more than a year. After the tariff breakthrough in December, Chinese purchases of certain US products helped, as did higher commodity prices.
Disappointing economic data in the UK, however, has sent sterling below $1.30 for the first time this year. News that the economy unexpectedly shrank in November, choked by election uncertainty, has increased market expectations of a Bank of England interest rate cut this month to 50%, with some officials hinting at looser policy. The FTSE 100, in turn, rose to its highest level in three weeks yesterday.
November's monthly UK GDP fell 0.3%, while industrial production fell 1.2% and manufacturing production fell 1.7%. Construction output surprised to the upside, growing 1.9%, but endured a poor month previously.
Households, however, have started the new year with more optimism than the central bankers. The clarity brought by the election result has lifted the fog surrounding the UK economy, according to a survey by YouGov and the Centre for Economics and Business Research. Households have become slightly more concerned about house prices, but much more positive about their personal finances.
William Hill announced yesterday that its annual profits will be ahead of expectations after a boost from a run of bookmaker-friendly football results and a positive quarter in America, where it has established a presence in nine states. Gambling stocks are trading lower today, however, following the announcement of a rule which will prevent customers using credit cards.
The government is likely to intervene today with a rescue plan for Flybe, which faces imminent collapse otherwise. The solution could involve deferring taxes the airline owes but would also involve investment from existing shareholders. Thousands would be stranded if Flybe goes under, but there is no guarantee of a solution.
AstraZeneca has closed a late-stage trial into a heart disease drug, costing it up to $100m. Britain's most valuable pharmaceutical company, based in Cambridge, will have to devalue its inventories and fourth quarter earnings will be affected.
Boohoo has released a positive trading update that counters some concerns about the UK economy. Revenue rose by 44% in the last four months of 2019, to £473.7m. It also revealed that it expects full-year revenue to surpass City expectations. The AIM-listed stock has a market cap of £3.7bn, meaning it has overtaken Marks & Spencer.
Marks & Spencer, meanwhile, admitted that it had misjudged men's clothing preferences in the approach to Christmas, one of the “disappointing” issues that affected its performance towards the end of last year. Like-for-like sales edged up only 0.2% in the final months of the year, while M&S also admitted it had ordered too much food.
Finally, Boeing is likely to face a bill of over $8bn in compensation for airlines whose 737 Max aeroplanes are grounded or undelivered, according to a respected aviation economist. Boeing's original estimate, when it set aside funds last year, was $4.9bn.
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Walker Crips
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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 transaction, and if you require professional advice you should contact your financial adviser or your usual contact at Walker Crips.
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Important Note
No news or research content is a recommendation to deal. It is important to remember that the value of investments and the income from them can go down as well as up, so you could get back less than you invest. If you have any doubts about the suitability of any investment for your circumstances, you should contact your financial advisor.
The value of investments can fall as well as rise. Investors may get back less than invested. Past performance is not a reliable indicator of future results.
The value of investments can fall as well as rise. Investors may get back less than invested.
