Pound ebbs on house price and Q3 earnings slowdown
Following a busy day in British politics on Monday, cable started somewhat gingerly on Tuesday. Any Brexit suspension high was ended as the Pound was left a bit dazed by some uninspiring market performance indicators, and renewed General Election chatter.
While by no means a disastrous start to the day, there is no doubt the day’s political back-and-forth will contribute to Sterling’s emotional state, as all sides’ bombast plays fast-and-loose with market fundamentals.
Commenting on early morning currency movements, Spreadex Financial Analyst Connor Campbell stated,
“Despite a decent Asian session, the region continuing to push higher as ‘phase one’ of the US-China trade deal nears completion, the European markets slunk out of the gates on Tuesday.”
“After struggling to keep up with its peers on Monday, the FTSE once again started as the worst performing index, just about slipping under 7300 as it fell half a percent.”
“There were a few things counting against the index this Tuesday. A slump in Q3 earnings, even if they were better than forecast, helped send BP 0.9% lower, while a further slowdown in house price growth weighed on the likes of Barratt Developments, Berkeley Group and Taylor Wimpey, which were down anywhere between 0.7% and 1%. The index’s banking sector was also in a bad mood, likely because Boris Johnson, with help from the SNP and Lib Dems, is formulating a new way to get to a December election after losing a vote on Monday.”
“Talking of any potential trip to the polls, the pound coped fairly well with the prospect. Against the dollar it dipped just 0.1%, while against the euro it actually pushed up by the same amount.”
“Elsewhere the DAX and CAC both fell 0.3% apiece, effectively reserving the gains they had managed by Monday’s close.”
Elsewhere in political and macro economic news, there have been updates from; new Brexit deal agreed, UK economy looks likely to avoid recession, Hong Kong protester shooting and China’s strategy, the Supreme Court rules against Boris, the collapse of Thomas Cook (LON: TCP), the bid for the London Stock Exchange (LON: LSE), Lloyds Banking Group PLC (LON: LLOY), Barclays (LON: BARC) and Deutsche Bank (ETR: DBK).
BP Q3 results take a hit
BP (LON:BP) revealed a hit to its underlying replacement cost profit in its third quarter results on Tuesday.
Shares in the British multinational oil and gas company were down during Tuesday morning trading.
Underlying replacement cost profit is BP’s definition of net income.
The company said that underlying replacement cost profit for the third quarter of the year amounted to $2.3 billion, considerably lower than the $3.8 billion figure recorded a year prior.
“The result was impacted by significantly lower Upstream earnings, resulting from lower prices, maintenance and weather impacts,” BP said in its third quarter results.
BP added that a divestment-related, non-cash, non-operating after-tax charge of $2.6 billion caused a reported loss of $700 million for the quarter.
“BP delivered strong operating cash flow and underlying earnings in a quarter that saw lower oil and gas prices and significant hurricane impacts,” Bob Dudley, Group Chief Executive, commented on the results.
“Our focus remains firmly on maintaining financial discipline and delivering safe and reliable operations throughout BP,” the Group Chief Executive continued.
Bob Dudley said: “We’re also continuing to advance our strategy, making strong progress with our divestment plans and building exciting new opportunities in fast-growing downstream markets in Asia.”
Meanwhile, Chief Financial Officer Brian Gilvary said that “net debt stayed flat in the quarter, though gearing rose slightly following a reduction in equity as a result of divestment-related impairment charges.”
“With growing free cash flow and receipt of disposal proceeds, we continue to expect net debt to trend down over time. In addition, the underlying effective tax rate for the quarter was lower than previously indicated, mainly due to higher-than-expected estimated Rosneft earnings and a lower-than-expected impact from the Upstream profit mix,” the Chief Financial Officer continued.
Earlier this year in July, the British multinational oil and gas company said that underlying replacement cost profit amounted to $2.8 billion for the second quarter of the year.
Shares in BP plc (LON:BP) were trading at -0.90% as of 09:24 GMT Tuesday.
Annual house price growth shows little change, Nationwide
There was little change in UK house price growth for the month of October, new data revealed on Tuesday.
Nationwide’s House Price Index revealed that annual house price growth remained below 1% for the eleventh consecutive month, at 0.4%.
Additionally, the data also reveals a month-on-month rise of 0.2%. The data had previously revealed that in September, UK annual house prices grew by 0.2%. “Average prices rose by around £800 over the last 12 months, a significant slowing compared with recent years – for example, in the same period to October 2016, prices increased by £9,100,” Robert Gardner, Nationwide’s Chief Economist, commented on the data. “Indicators of UK economic activity have been fairly volatile in recent quarters, but the underlying pace of growth appears to have slowed as a result of weaker global growth and an intensifying of Brexit uncertainty. To date, the slowdown has centred on business investment, while household spending has been more resilient,” Nationwide’s Chief Economist continued. This week was meant to be the deadline for the nation’s departure from the European Union. However, Boris Johnson formally accepted the EU’s offer to extend the Brexit deadline until the end of January. The GBP/USD is trading around 1.2850 as the Prime Minister tries again to set elections for the end of the year. “The underlying pace of housing market activity has remained broadly stable, with the number of mortgages approved for house purchase continuing within the fairly narrow range prevailing over the past two years,” Robert Gardner continued. Nationwide’s Chief Economist said: “Solid labour market conditions and low borrowing costs appear to be offsetting the drag from the uncertain economic outlook. The question is whether this pattern will continue.” “There were tentative signs of a softening in the jobs market in the three months to August, as employment fell, unemployment rose, and wage growth slowed a little. If this trend continues it would be a significant concern, as the labour market has been the key factor underpinning the resilience of the household sector in recent years.”Prologis set to buy Liberty in $12.6 billion deal
Prologis Inc (NYSE: PLD) are set to buy rival Liberty Properties (NYSE: LPT) in reported a $12.6 billion deal.
This deal will allow Prologis to expand its American presence whilst removing a big competitor in the real-estate business sector.
When the deal finalizes, shareholders of Liberty Properties will receive 0.675 times a Prologis share for each unit they hold, equating to $61 per share.
The deal is expected to be completed in the first quarter of 2020.
Prologis, who have a global reputation in this sector said the all stock deal inclusive of debt would allow expansion into U.S. markets such as Pennsylvania’s Lehigh Valley, Chicago, Houston, New Jersey and Southern California.
“Liberty’s logistics assets are highly complementary to our U.S. portfolio and this acquisition increases our holdings and growth potential in several key markets,” Prologis Chairman and Chief Executive Officer Hamid Moghadam said.
“The joining of these two platforms at this moment, when industrial logistics has become so pivotal to the new economy, will further the industry’s ability to support the nation’s supply chain,” Liberty Chairman and Chief Executive Officer Bill Hankowsky said.
Prologis have plans to sell $3.5 billion worth of assets, including $2.8 billion of “non-strategic” logistics properties and $700 million of office properties, the announcement explained.
This acquisition is expected to save around around $120 million from administrative costs, operating leverage, lower interest expense and lease adjustments, the companies said.
“Liberty’s high-quality logistics real estate will strengthen our portfolio as well as our customer roster,” said Prologis chief investment officer Eugene F. Reilly. “We are also excited about the caliber of talent at Liberty and expect a number of their employees to join us to help manage the portfolio and execute on capital deployment.”
Prologis already boast customers such as Amazon (NASDAQ: AMZN), Walmart (NYSE: WMT) and FedEx Corp (NYSE: FDX) and this will expand their American business further.
Currently, shares of Prologis are trading at 86.60 USD per share, whilst shares of Liberty trade at 58.31 USD. 28/10/19 15:35BST.
In the real estate sector, investors have switched to fixed rate loans. Additionally, Rightmove have said that the Autumn bounce has been snuffed by Brexit and Hunters Property are optimistic about their full year outlook.
Eurasia Mining shares surge after confident Chairman statement
Eurasia Mining (LON: EUA) have had their shares surge, allowing them to regain ground after shares slumped on Friday, this follows a statement from the Chairman explaining that the firm was in a strong financial position.
Chairman Christian Schaffalitzky said the group’s directors “believe the Company is in a strong financial position going forward.
Schaffalitzky added: “With the recent share price increase a number of shareholders have indicated they wish to exercise their warrants and hold these shares long term. We are grateful to them and likewise the Directors have indicated they are holding their 22% in the Company on a long-term basis.”
The producer of palladium, platinum, iridium, rhodium and gold in Russia said it has received alerts from holders on Friday that warrants over 16 million ordinary shares had been exercised at 53 pence per share.
The total sum of these new released shares amounted to £85,000.
Additionally, the company said that cash payments for the sale of metal from the operating West Kytlim mine and metal already delivered, are due before year-end.
The chairman concluded: “As the Company prepares for a significant increase in production at the West Kytlim mine next year, the funds from our operations and from the warrants will be used to prepare for mining at the second site and to upgrade our wholly-owned equipment, now that we are no longer using a sub-contractor and enjoy 100% of the margin as opposed to 30-35% previously.”
Even though Eurasia remains a young company, with a market cap of just below £46 million, it seems that there is renewed optimism about the firms potential.
The rise has caused Eurasia’s shares to be at their highest point within their five year records, showing an appetite for Eurasia shares by investors.
Currently, shares of Eurasia Mining are trading at 1.8p per share seeing a monumental 68.73% rise across Monday trading. 28/10/19 15:08BST.
In the mining sector, there have been updates to Centamin (LON: CEY) have experienced a output decline, Serabi Gold Plc (LON: SRB) have shown strong production figures in their third quarter and Hochschild Mining (LON: HOC) have given investors reassurance after a questionable trading update.
Mace Macro wins facilities management deal with Superdry
Mace Macro Ltd have been appointed for facilities management services to fashion giant Superdry (LON: SDRY).
The Japanese fashion brand has chosen Macro to oversee its facilities management supply chain under a managing agent contract.
The deal covers 15 countries across Europe and the United States, which allows Macro to deliver this service for the first time to such a reputable firm.
Additionally, this will give Mace Macro much exposure to deliver future projects of this kind.
Macro was selected after they demonstrated the ability to deliver excellent service across the companies entire property portfolio.
There was a particular focus on ensuring visibility of information reporting across Superdry’s 225 retail units and 26 offices.
Commenting on the contract award, Ross Abbate, Macro’s Global Managing Director, said: “We are delighted to have been chosen as Superdry’s FM contractor. This is a great opportunity for us to demonstrate our capability in the retail sector with a globally recognised client. We are looking forward to supporting Superdry in creating the most efficient operating model and providing consistency, visibility and service excellence across their portfolio.”
Sheena Waldron, Head of Retail Support at Superdry plc. added: “We are excited to have Macro providing facilities management services across our property portfolio. We needed a global partner who understands efficiency and can deliver the best operating model for all our properties in Europe and the United States, and Macro have demonstrated that they have the capability to support our operations.”
Superdry have been in the news of late after appointing Julian Dunkerton their founder as the new CEO until 2021.
However, Julian Dunkerton made a return to the company, causing most of its board members to quit and led to the resigning of many senior officials.
After a tough period, where it was announced the Superdry made a loss in July, this move is one of optimism for shareholders.
Shares of Superdry are trading at 411.2p per share. 28/10/19 14:31BST.
In retail news, there have been updates. TUI (LON: TUI) have revealed their new routes for Summer 2020, Dunelm’s (LON: DNLM) stock price crashed despite revenue increases and Boohoo (LON: BOO) shares increased after their latest acquisition.
Hong Kong enters recession as protests continue
Hong Kong has been declared to be in recession as it has been hit by five months of anti-government protests which have resulted in violence, flames and financial stagnation.
Demonstrators have resulted to throwing petrol bombs and using napalm as a means to protest against Chinese suppression, whilst police have responded with tear gas, water cannons and rubber bullets.
“The blow (from the protests) to our economy is comprehensive,” Paul Chan said in a blog post, adding that a preliminary estimate for third-quarter GDP on Thursday would show two successive quarters of contraction – the technical definition of a recession.
“The government will be announcing its advance estimates for the third quarter on Thursday. After seeing negative growth in the second quarter, the situation continued in the third quarter, meaning our economy has entered technical recession,” he wrote.
Chan added that it would be extremely difficult to achieve the government’s pre-protest forecast of 0-1% annual economic growth.
Protestors continue to be riled as they oppose increasing interference by Beijing authorities in Hong Kong.
Hong Kong returned to Chinese rule in 1997 under a “one country, two systems” formula intended to guarantee freedoms not seen on the mainland.
However, protestors are no longer happy with the status quo as the battle of political and geographical sovereignty continues to ignite.
China denies meddling. It has accused foreign governments, including the United States and Britain, of stirring up trouble.
As protests reach their 21st week, no progression has been made. Both British and American businesses operating in Hong Kong have faced trouble. Firms such as Starbucks (NASDAQ: SBUX) have also had shop fronts torched.
Tourist numbers have plummeted as the protests worsen, seeing tourist numbers fall by over 50%.
Internal Hong Kong business has also slumped, where malls and local businesses have been forced to close amidst tensions.
Chan concluded “Let citizens return to normal life, let industry and commerce to operate normally, and create more space for rational dialogue,”
Whether China and Hong Kong will give any ground for negotiations is yet to be seen.
However, if Hong Kong continues in this trend then a longer term can be expected with low revenue growth and a major slump in economic output.
In political affairs news there have been updates, the FCA has expressed concerns over institutional and retail investors. The London Stock Exchange (LON : LSE) reported strong third quarter trading figures and Facebook’s (NASDAQ: FB) Libra currency is still facing stern tests.
AT&T unveil long term strategy following Elliot Management pressure
AT&T Inc (NYSE: T) have unveiled their long term strategy that included adding two new board members and selling up to $10 billion worth of non core business next year.
Additionally, plans to pay of all their debt from the purchase of Time Warner following pressure from activist investor Elliott Management.
Elliot Management revealed a $3.2 billion stake in the company in September. Since then, Elliot have been pressing AT&T to cut costs, make management changes and scale back expansion plans.
The company added that they expect Randall Stephenson to remain chief executive during 2020.
In a letter to shareholders, Elliot said that AT&T would evaluate all potential CEO candidates whilst separating the Chairman and CEO positions.
“We commend AT&T for the positive steps announced today, which will create substantial and enduring shareholder value at one of America’s greatest companies,” Elliott said in a statement.
In an attempt to reduce its debt costs valued at $153.5 billion at the end of Q3, AT&T have sold off assets in Puerto Rico to Liberty Latin America (NASDAQ: LILA) for $1.95 billion.
Another sale was announced over the weekend. Investment group PPF owned by Petr Kellner agreed to buy broadcaster Central European Media Enterprises Ltd (NASDAQ: CETV) in a cash deal valued at about $2.1 billion. As AT&T was CME’s largest shareholder, this means that CME & AT&T will part ways when this deal is completed.
The company expects to generate $14 billion through asset sales and other plans by the end of 2019. So far this year, it reduced its net debt by $12.7 billion.
Total operating revenue fell to $44.59 billion from $45.47 billion. Analysts were expecting about $45 billion, according to IBES data from Refinitiv.
AT&T announced 100,000 new mobile subscribers, which was a positive note for the technology giant.
Currently, shares of AT&T are trading at $36.91 seeing a 0.11% rise. 28/10/19 13:45BST.
In the technology sector there have been updates. Castleton’s (LON: CTP) shares have sunk following poor trade reports, Blue Star (LON: BLU) have expanded into the Esports market and Huawei sales have increased in their third quarter update.
Invesco announces access to Kuwait equity market
Invesco Ltd (NYSE: IVZ) has launched a UCITS ETF that offers investors access to the Kuwait equity market.
This comes as a development of the inclusion in the MSCI Emerging Markets Index planned for 2020.
The Invesco MSCI Kuwait UCITS ETF provides exposure to approximately 85% of the market capitalisation in Kuwait, including companies involved in the nation’s various economic and cultural development projects.
With more than half of total GDP coming from petroleum export revenues, the Kuwait government has started a seven pillar program called the “New Kuwait Vision 2035”.
The purpose of this program is to diversify the economy and transform Kuwait into a financial, cultural and institutional leader in the region.
This includes creating more sustainable housing, developing infrastructure, improving health care services and education, and making the government more transparent and efficient.
Chris Mellor, Head of EMEA ETF Equity Product Management at Invesco, said: “With an index comprising financials, communication services, industrials, real estate and materials sectors, our new ETF offers investors the opportunity to gain exposure to those companies at the heart of the long-term transformation taking place in Kuwait. In the shorter term, the inclusion into the MSCI Emerging Markets Index could drive significant inflows from asset managers needing to maintain benchmark weights.”
However a few key investment risks were outlined in the Invesco trading statement released this morning, they are as follows:
- The value of investments, and any income from them, will fluctuate. This may partly be the result of changes in exchange rates. Investors may not get back the full amount invested.
- This fund enters into transactions which expose it to the risk of bankruptcy, or other types of default, by the counterparties to those transactions.
- As this fund invests in companies from a single country, investors should be prepared to accept a higher degree of risk than an ETF that is geographically diversified.
- This fund enters into swap agreements which provide the performance of the Reference Index. These imply a range of risks including the possibility of an adjustment to, or even the early termination of, the swap agreement.
Autins end year in line with expectations
Autins Group PLC (LON: AUTG) have updated their trading figures for the year, concluding that it was expecting to produce results in line with 2019 financial expectations.
The Rugby based firm had outlined plans to significantly cut costs and operational efficiency.
Autins works with the likes of Aston Martin, Bentley, Jaguar Land Rover and Porsche.
The automotive acoustic and thermal insulation company seemed optimistic about 2019 trading despite both political and economic uncertainties.
The AIM listed firm said that “extensive” management actions employed to reduce costs and increase operational efficiency had successfully delivered improved profit margins.
Autins said they were “well-placed” with sufficient capacity to take advantage of the “many opportunities” in its pipeline, to grow and diversify the business.
External sales to customers outside the UK also have grown, and boosted performance from lightweight high-performance material ‘Neptune’ in securing multiple new business client wins, and with production levels ramping up towards the end of the 2019 financial year, which had continued in the new year.
This has been a challenging year for both the industry and the Group, but it has also been a year of repositioning, recovery and new business wins,” said chief executive officer Gareth Kaminski-Cook.
Kaminski-Cook also added ““The positive momentum is encouraging and, combined with a stronger balance sheet following the successful placing in the summer, gives cause for optimism for the year ahead.”
Autins have made an active effort to grow and diversify following strategies to pursue work on new vehicle platforms with new and existing manufacturers.
Autins are set to release their annual results ending in September on December 11th.
After such hopeful predictions it will only be seen whether this optimism can be justified.
Currently, shares of Autins Group Plc are trading at 19p per share. 28/10/19 12:27BST.
In the manufacturing industry there have been updates for the following companies. Nissan (TYO: 7201) have moved Juke operations to the UK, Pipehawk (LON: PIP) had a strong second half trading period and Georgia Capital (LON: CGEO) have experienced their share value slip.