Gold prices steady as trade war doubts persist
After carrying on a seemingly unassailable rally in 2019, gold held relatively steady on Tuesday. During the session, the asset’s price hit its highest point since November 7th, before dropping by 0.13% to USD 1,469.05.
Gold’s ability to maintain this price level tells us at least one thing – markets aren’t ready to attempt on-risk sentiment. Between a lack of resolution in the Sino-US trade war situation and slow progress in European diplomatic struggles, investors aren’t yet ready to let go of the gold life raft.
Overnight, there was a pessimistic outlook coming from Beijing, however Trump extended an olive branch of good will with the announcement that he would delay the Huawei (SHE: 002502) ban by three months.
The focus now shifts to the Fed meeting on Wednesday and the unpopular prospect of further rate cuts. As the dollar began Tuesday’s session at a near two-week low, Trump will no doubt push for further – if myopic – easing from Jay Powell. Investors hoping to play it safe should perhaps cling to their holdings in gold for warmth, as any chance the market climate won’t turn frigid, should not be ruled out.
Elsewhere in gold news, KEFI Minerals PLC (LON: KEFI) sought approval to proceed at its Tulu Kapi gold project, Goldplat PLC (LON: GDP) reported a strong third quarter and Shanta Gold Limited (LON: SHG) made progress on paying down its debt.
Speaking on gold and the trade war back-and-forth, analysts offered the following insights,
“We’re not seeing any big moves at the moment and given the proximity to the $1,490-level, movements will be sideways in the short term, unless Beijing or Washington come and say that a trade deal is unlikely,” said Michael McCarthy, chief market strategist at CMC Markets.
“The to and fro between the two parties surrounding the first phase of the deal is keeping prices in a tight range,” ANZ analyst Daniel Hynes said. “Lingering global economic scenario and a weaker dollar is providing some support to gold.”
“It is worth noting that recent gains (in gold) have been led by fast-money interest in the face of (exchange traded fund) ETF outflows, positioning that is fickle amid price volatility,” according to MKS PAMP.
Tata Steel plans 3,000 job cuts in ‘severe’ market
Indian multinational steel company Tata Steel Limited (NSE: TATASTEEL) announced that it plans to cut up to 3,000 jobs across its European operations.
The Company said the streamlining was being carried out as a result of a “severe” international steel market. While it said the cuts would be office-based and not result in any plant closures, the Company said that its focus going forwards would be on higher-value products.
The news followed a failed merger attempt with German rival Thyssenkrupp (ETR: TKA) during the summer, which both parties hoped would enable them to reduce costs.
Commenting on the update, chief executive of Tata Steel in Europe, Henrik Adam, stated,
“Today we are highlighting important proposals towards building a financially strong and sustainable European business,”
“We plan to change how we work together to enable better cooperation and faster decision-making. This will help us become self-sustaining and cash positive in the face of unprecedented severe market conditions, enabling us to lead the way towards a carbon-neutral future.”
In terms of what this means for Tata’s UK business: 8,385 of the Company’s 20,000 staff are based in the UK, at the Port Talbot steelworks.
Stating his concern regarding the update, Wales’ economy minister Ken Skates said: “I am seeking an urgent conversation with Tata to establish what this means for workers in Wales and how we can support those affected by this announcement.”
Elsewhere in UK steel news, the trend of overseas buy-ups of British assets looks set to continue as Marc Meyohas agrees to a £1.2 billion investment in the Company from Chinese firm Jingye (SHA: 600768). This followed the Company’s collapse earlier this year, and subsequent bailout from the UK Government. Responding to the news, Business Minister Andrea Leadsom said,
“I have been given reassurances that next to all current staff will be kept and that in the medium to longer term they are likely to want to expand the workforce”
Despite the deal giving China control of a third of Britain’s total steel industry, the Business Minister said, “There aren’t any national security issues with this acquisition.
“In my dealings with Jingye, I think they will show themselves to be very committed to continued and expanded production [here] in Scunthorpe and on Teesside.”
Intermediate Capital Group shares spike following earnings rise
Intermediate Capital (LON: ICP) have seen their shares spike on Tuesday as the firm reported an earnings rise to shareholders amid an impressive update.
Shares of Intermediate Capital were 4.28% to the good trading at 1,558p. 19/11/19 12:42BST.
The firm alluded to its diversification strategy causing the impressive results, which saw continued asset growth.
Additionally, the FTSE250 (INDEXFTSE: MCX) listed firm saw a 32% interim profit rise in its fund management business.
The company’s assets under management amounted to €41.07 billion at September 30, up 11% from €37.08 billion as at March 31, with €4.61 billion of new money raised across 14 strategies, which will put shareholder faith in the new diversification approach from Intermediate.
For the six months to September 30, Intermediate Capital recorded group pretax profit of £153.4 million, up 24% from £124.0 million a year ago, helped by a 15% increase in profit in the company’s investments business to £68.4 million.
Intermediate Capital Chief Executive Benoit Durteste said: “These strong results demonstrate our ability to attract assets to a broad range of new fund strategies that are adjacent to our existing portfolios. Our diversification has resulted in continued healthy fundraising results and the 32% growth in Fund Management Company profits.”
“We are well-positioned to deliver sustainable growth. Unlike traditional asset managers, we do not suffer short term outflows as a consequence of the movement in financial markets; we are maintaining or increasing average fee rates on an underlying fund basis,” Durteste added.
The fund management sector saw a 32% rise in interim profit from £64.4 million to £85 million, which shows progression for the firm.
Intermediate Capital expects its annual operating margin to be in excess of 50%, up from 43% previously, supported by a positive outlook.
Indeed these figures are impressive from Intermediate, but competitors have also made gains which will further stimulate Intermediate to develop their strategies.
Brewin Dolphin Holdings plc (LON: BRW) have seen their funds and income increase, whilst AJ Bell PLC (LON: AJB) reported strong gains in the second quarter.
AFC Energy shares crash following share subscription announcement
Shareholders of AFC Energy plc (LON: AFC) have seen their shares crash on Tuesday following a share subscription announcement.
Shares of AFC Energy crashed 10.39% on Tuesday afternoon to 22p. 19/11/19 12:27BST.
AFC Energy are a firm which develop alkaline fuel cells for electricity production, and the firm has headquarters in Cranleigh, Surrey.
AFC pledged to raise £520,000 through a share subscription which will allow the company to fulfill orders following a planned demonstration program in December.
The hydrogen power generation firm issued 2.6 million shares, priced at 20p per share. Interestingly, this saw a 22% discount to the closing price of AFC shares on Monday which would have concerned shareholders.
The shares were raised from a single overseas institutional investor.
“The launch of AFC Energy’s first hydrogen fuelled, zero emission EV charger unit next month means we must now prepare ourselves to respond to orders in a timely manner. The funding announced today supports these activities across both the sales function and supply chain with a view to accelerating our readiness for our deployment in 2020,” said Chief Executive Officer Adam Bond.
Following admission, AFC Energy will have 450.6 million shares issued overall.
Only eight days ago, AFC saw their shares rally after it was reported that internal expectations had been smashed.
The share price last Monday rallied to 28.7p but it seems that the share placing has now dampened investor spirits.
The energy market continues to become more competitive, as i3 (LON: I3E) made a new discovery a few weeks back and Hurricane Energy (LON: HUR) and IGAS Energy (LON: IGAS) exceeded their interim expectations.
Additionally, Cairn Energy (LON: CNE) saw their shares drop after a double blow at the end of October.
It seems that AFC have backtracked on the progress that was initially reported, however AFC have proved to shareholders that they have a way of bouncing from setbacks, which may appease shareholders somewhat in the increasingly saturated market.
Kape Technologies shares rally after deal agreed for Private Internet Access
Kape Technologies (LON: KAPE) have seen their shares rally on Tuesday after it was reported that a deal was agreed to purchase Private Internet Access (PIA).
Kape shares rallied 32.6% to 102p on Tuesday. 19/11/19 12:09BST.
Shareholders should be pleased with the results following the gains made by competitors, in a market which is becoming increasingly competitive and saturated.
Intelligent Ultrasound (LON: MED) have made developments in AI Software, whilst Sophos Group (LON: SOPH) saw their shares rally after a strong update.
Kape provide privacy focused security software, and operates through three segments: App Distribution, Media and Web Apps.
Kape have become very excited about the new acquisition and have informed shareholders that the merger will create a new global cyber company which should double profits.
The AIM (INDEXFTSE: AXX) listed firm secured a deal which will cost £74 million.
PIA, which was established in Colorado in 2009, specialises in so-called virtual private networks (VPN), which allow users to set up an encrypted internet connection.
“This is a game-changing moment in Kape’s development,” said Kape chief executive Ido Erlichman.
“This transaction will be transformational for our business, enabling Kape to aggressively expand our footprint in North America, broaden our product offering, further strengthen our recurring revenue base and gain access to an extremely rich pool of talent.”
Kape expects the deal to boost earnings by 90% by the end of 2020, with the new titan set to report revenues between $120 million and $123 million.
As part of the deal, LTMI’s management will join the London firm, with chief executive Ted Kim taking over the combined company’s operations in North America.
“We are excited to join forces with Kape, and this transaction is a truly monumental milestone in realising PIA’s vision of creating a privacy company with a mission to improve our customers’ digital privacy and security worldwide,” Kim said.
This deal should spark shareholder optimism, and if Kape deliver the expectations that they have forecasted then shareholders will see both strong trading figures and impressivee returns.Lidl employees to earn 13-30% higher than National Living Wage
German supermarket chain Lidl today announced that it plans to dedicate £10 million to give 19,000 of its employees a pay rise.
The pay rise would see hourly rates for its staff on entry-level pay, go from £9.00 to £9.30 outside of London. Within the M25, rates of £10.55 to £10.75 would increase to £11.70, depending on employees’ length of service and location.
In real terms, this would mean that staff would be on wages that are between 13-30% above the Government’s current ‘National Living Wage’, as well as being in line with the Living Wage Foundation’s standards.
Commenting on the announcement, Lidl GB Chief Executive Christian Härtnagel said,
“During this time of such uncertainty, we feel fortunate to be able to make this investment in our colleagues, and give them peace of mind with regards to their salary,”
“Our hourly paid employees represent over 80% of our entire workforce, and are the absolute backbone of our business. It is because of them that we continue to be the fastest supermarket, and are able to realise our ambitious expansion plans.”
“This move is, therefore, testament to the unwavering commitment that each and every one of them puts into their work on a daily basis.”
Lidl said the new wage structure will come into effect in March 2020.
Also this year, the supermarket announced £500 million of investment in London over the next five years, as well as stating that it wanted to expand its current offering of 770 stores, to 1,000 stores by 2023.
The Company sets a positive example that should be applauded and rewarded by the Government. Its efforts to expand its presence will not only provide employment opportunities, but jobs that provide a decent standard of living.
Issuing less positive updates, Asda (NYSE: WMT) talks about its quarterly slump and Kantar (NYSE: BCSF) highlights a gloomy outlook for supermarkets. In more uplifting news, Tesco Plc (LON: TSCO) said it was going to trial its Clubcard Plus offering.
UK Government give green light for Advent to purchase Cobham
The UK government have appeared to have give the green light for the planned purchase of Cobham (LON: COB) by US private equity group Advent.
The deal is set to cost Advent $5 billion, and the deal won clearance after the group offered a number of commitments to address national security concerns.
Shares in Cobham rallied 3.68% after the announcement and are trading at 160p. 19/11/19 11:55BST.
The deal was put on hold after British business minister Andrea Leadsom spoke to government departments about the risk of the deal.
However, Leadsom confirmed on Tuesday that she would allow the deal to take place following an agreement of several legal details including the placement of British Executive’s on the Cobham board.
“We have worked closely with the Ministry of Defence to construct undertakings that would adequately mitigate against any potential national security risks,” Shonnel Malani, partner at Advent, said.
Advent will also have to give prior notice to the Ministry of Defense, if arrangements are made to sell Cobham’s business are made whilst government contracts are still to be fulfilled.
“No decision will be taken on whether to accept the undertakings until the consultation has closed and the representations have been carefully considered,” Leadsom said in a statement.
However, the Cobham is still recovering from a string of profit warnings in 2016 and 2017 that forced it to ask shareholders for cash and prompted Chief Executive David Lockwood to overhaul operations.
“This is a significant milestone and an important step towards providing greater certainty for Cobham’s employees and customers,” Lockwood said in response to Leadsom’s comments.
Competitors have made gains in the industry, where QinetiQ Group plc (LON: QQ) reported strong gains in their most recent update. Additionally, Ultra Electronics (LON: ULE) met market expectations in their most recent update. However big names such as Lockheed Martin (NYSE: LMT) and Boeing (NYSE: BA) continue to make headlines in dominating the industry.Equiniti shares plummet after expectations remain gloomy
Equiniti Group PLC (LON: EQN) have seen their shares plummet on Tuesday as the firm gave shareholders a gloomy update for its annual expectations.
Shares of Equiniti plummeted 11.79% to 200p. 19/11/19 11:35BST.
Equiniti are a British based outsourcing business focusing on financial and administration services and have faced a turbulent financial 2019.
The FTSE250 (INDEXFTSE: MCX) listed firm said underlying earnings before interest, taxes, depreciation and amortisation for 2019 will be at the lower end of market estimates of between £136 million and £142 million due to lower activity in higher margin UK corporate business.
However, annual revenue is predicted to be at the upper end of £550 million to £567 million market estimate range.
In 2018, underlying Ebitda was £122.3 million on revenue of £530.9 million.
The Investment Solutions business continued to dominate the market, growing its market shares with new share register wins.
Equinti expects no further non-operating charges in the second half of 2019 following a completion of the US separation in the first half.
“Whilst we expect the uncertainty in the macro environment to continue, Equiniti remains well positioned. We expect further organic growth in the UK as we build on our relationships with our exceptional client base. The US offers a platform for accelerated growth based on market opportunity, the potential to take market share and the opportunity to cross-sell digitised services into our blue-chip client base,” the company said.
Equiniti join a long list of financial service firms who have experienced declines in trading and slumping trading figures, the gloomy outlook comes at no surprise considering the state of the global market. Both Lloyd’s (LON: LLOY) and HSBC (LON: HSBA) have seen third quarter slumps amid cut throat market trading conditions, whilst Deutsche Bank (ETR: DBK) have taken this a step further and reported a loss in their most recent update. Certainly, the issues faced by Equiniti and other firms allude to a bigger issue in the market. The ongoing Brexit saga coupled with the tense relations between the US and China do add fire to the fuel, but it may be a case of being patient and weathering the storm in tough trading times.UK manufacturing still below long-run average
Manufacturers in the UK saw a rise in orders in November, but remained below the long-run average.
Data from the Confederation of British Industry revealed that 13% of manufacturers reported total order books higher than normal, whilst 40% said that they were below normal.
This gives a balance of -26%, up from the -37% balance recorded the month prior in October, where levels reached the weakest in nine years.
However, the figure remains below the long-run average of -13%, the Confederation of British Industry said.
Export order books also rose to a stronger level than in October, when they were at their weakest level since the 2008 financial crisis.
“While the thick fog of uncertainty from a No Deal Brexit has lifted somewhat, the manufacturing sector remains under pressure from weak global trade and a subdued domestic economy,” Anna Leach, CBI Deputy Chief Economist, commented on the data.
“Order books remain below average, and output volumes continue to fall. When taking into account the deteriorating outlook for manufacturing globally, it’s clear that the outlook for the sector remains precarious,” the Deputy Chief Economist continued.
“The General Election is an opportunity for all parties to explain how they will shore up our economy. Ratifying a Brexit deal and moving on to build a vibrant future relationship with our biggest trading partner, based on frictionless trade, will be vital – both for UK manufacturers, and business as a whole.”
The UK was supposed to depart from the European Union at the end of October, but was granted yet another extension to the deadline, prolonging the uncertain outlook even further.
Parties now prepare for the general election later this year on 12th December.
Trade war slow progress but markets rally on Huawei ban delay
Without actually making much progress towards resolution, the Sino-US trade war debacle was able to eek out a sliver of positivity for indices clamouring for a shred of good news.
With its high position on president Trump’s order paper looking under threat – with domestic political engagements vying for his attention – any substantive movement on trade war amelioration looks a long way off.
Nothing too new there. As markets opened on Tuesday morning, they contented themselves with Trump’s consolation prize: a delay on the Huawei ban, which at the very least acts as a symbol of good will.
Speaking on the comparatively improved sentiment of markets, Spreadex Financial Analyst Connor Campbell commented,
“Despite emergent doubts surrounding ‘phase one’ of the US-China trade deal, the European markets managed to climb higher after the bell.”
“Even though Saturday morning’s phone call was described as ‘constructive’, CNBC claimed on Monday that the mood in Beijing is ‘pessimistic’ according to a government source, with the shift coming after Trump denied he would be rolling back tariffs. And with the ongoing impeachment hearings, and then the election next year, the talks could be significantly dragged out as China stall for a potentially better agreement. Oh, and remember, there’s also the small issue of the fresh tariffs on Chinese goods scheduled for mid-December.”
“The blow of this report was eased, however, by the US government delaying its Huawei (SHE: 002502) ban by another 3 month, a move that, if the European open is anything to go by, has been read as a sign that things are at least still cordial between the two superpowers.”
“Lifted by that move, the FTSE added half a percent, an increase echoed by the DAX; the CAC, meanwhile, wasn’t too far behind with a 0.4% rise. As for the Dow Jones, the US index is looking to strike 28100 for the first time later today, the futures pointing to a 65 point increase.”
Despite deflating updates from the UK house market and Volkswagen (ETR: VOW3) on Monday, the session opened brightly for Europe following the uplifting post-close announcement from Airbus SE (EPA: AIR).
“Following Monday’s Tory-supporting, polls-driven gains, sterling held steady ahead of this evening’s first head-to-head between Boris Johnson and Jeremy Corbyn on ITV (LON: ITV). Cable is sitting unchanged at a one-month(ish) high of $1.2957, while against the euro a 0.1% rise sent the pound to a 6 and a half month high of €1.1713.”