What can investors learn from Germany’s stock market crash?
The German stock market crash is a timely reminder of the need to broadly invest, affirms one of the world’s largest independent financial services organisations.
The comment from Tom Elliott, deVere Group’s International Investment Strategist, comes as the DAX, Germany’s top stock index, was nearing the red after shares in the country’s largest car makers dropped over a fresh probe into the diesel emission scandal.
Mr Elliott observes: “Eurozone stock markets have felt the pain of a strong currency in recent weeks, as investors think that improving economic data will force the ECB to curtail its bond-buying program prematurely and – if inflation picks up – lead to interest rate hikes.
The DAX 30, the key German stock market index, has fallen after several large motor companies – including BMW, Daimler and Volkswagen – face fines over diesel emissions. Last week, the Mayor of London announced plans to seek compensation from Volkswagen after the true scale of the company’s diesel-fuelled cars’ contribution to the city’s air pollution became known. The sector is at risk of punitive fines across the world.
Elliott continues: “However, while this is embarrassing for the German auto sector, and for German exporters more generally, it is likely to be a passing phase. The fines will be absorbed by shareholders, and meanwhile the German auto sector will return to the real long-term battle: is there a durable market for high quality, driver-driven, private cars?
Elliott goes on to say: “German – and European autos’ biggest threat comes from technology from the U.S. – in the form of driverless cars and battery cells, amongst other factors – as well as changing social habits, which include car pooling and young adults driving less in developed economies.”
Jimmy Choo shares soar on Michael Kors deal
Luxury fashion retailer Jimmy Choo (LON:CHOO) has been bought by Michael Kors, in a deal worth £896 million.
The deal was confirmed on Tuesday, just three months after Jimmy Choo was put up for sale. The luxury retailer, founded by Malaysian shoe designed Jimmy Choo and Tamara Mellon in 1996, has suffered from sinking sales in recent years as consumers gravitate towards higher and lower price brands.
Jimmy Choo will become a wholly-owned subsidiary of Michael Kors, with Kors’ honorary chairman, Mr Kors himself, saying “We admire the glamorous style and trendsetting nature of Jimmy Choo designs. We look forward to welcoming Jimmy Choo to our luxury group.” The sale plan has been backed by Jimmy Choo’s main shareholder, JAB Holdings, and will offer a growth opportunity for middle-market retailer Michael Kors. The company has also suffered from a change in consumer behaviour, sowngrading its sales forecasts for the rest of the year and planning to close as many as 125 of its full-price retail stores.We believe that Jimmy Choo is poised for meaningful growth in the future,” John D. Idol, the Michael Kors chairman and chief executive, said in a news release.
“We are committed to supporting the strong brand equity that Jimmy Choo has built over the last 20 years.”
Jimmy Choo shares have soared on the news, currently trading up 17.08 percent at 22831 (1234GMT).Ryanair share price falls as airline warns on Brexit consequences
Shares in budget airline Ryanair (LON:RYA) sunk on Monday after it issued another warning on Brexit, despite seeing profits for the quarter rise over 55 percent.
Profit after tax hit £397 million in the three months to June, with the airline making £11.40 profit on every passenger it carried during the period. Traffic rose 12 percent to 35 milliom as Ryanair’s lower fares and “Always Getting Better” led to a record 96 percent load factor.
Ryanair’s CEO Michael O’Leary commented on the stronger-than-expected figures:
“While Q1 average fares rose by 1 percent percent to just over £40, this was due to a strong April, boosted by Easter, offset by adverse sterling, lower bag revenue as more customers switch to our 2 free carry-on bag policy, and yield stimulation following a series of security events in Manchester and London.”
However, investor sentiment was dampened by a warning from O’Leary on the airline’s future in the wake of Brexit.
“We remain concerned at the uncertainty which surrounds the terms of the UK’s departure from the EU in March ’19. While we continue to campaign for the UK to remain in the EU Open Skies agreement, we caution that should the UK leave, there may not be sufficient time, or goodwill on both sides, to negotiate a timely replacement bilateral which could result in a disruption of flights between the UK and Europe for a period of time from April ’19 onwards”, he said.
“We, like all airlines, seek clarity on this issue before we publish our summer 2019 schedule in the second quarter of 2018. If we do not have certainty about the legal basis for the operation of flights between the UK and the EU by autumn 2018, we may be forced to cancel flights and move some, or all, of our UK based aircraft to Continental Europe from April ’19 onwards.”
The CEO’s warning led to Ryanair’s share price to fall on Monday, as investors take stock of the airline’s future. Shares are currently down 3.70 percent at 17.43 (1216GMT).
BREAKING: ECB holds interest rates at record low
The European Central Bank has left interest rates at their record low of 0.0 percent, after their monthly meeting on Thursday.
ECB chief Mario Draghi is set to hold a press conference later this afternoon, where more clues will be given as to the future of the bank’s stimulus policies.
The bank is currently buying 60 billion euros of bonds a month as part of its quantitative easing programme, which Draghi confirmed last month would continue “for some time”.
According to today’s announcement, Eurozone banks will still be charged 0.4 percent to leave money at the ECB instead of lending it, and banks will be charged 0.25 percent on money borrowed from the ECB.
The bank’s quantitive easing and low interest rates were designed to fend off deflation. Inflation stood at 1.3 percent in June, higher than expected but still below the bank’s target of 2 percent.
Easyjet shares drop 5pc as negative currency movements hit
Easyjet (LON:EZJ) shares sunk nearly 5 percent on Thursday morning, after warning that negative currency movements were likely to have a negative impact on profits going forward.
Figures were encouraging for the third quarter, with passengers carried increased by 10.8 percent to 22.3 million, and load factor increasing by 1.1 percentage points to 93.1 percent.
Total revenue per seat also increased by 2.2 percent at constant currency, ahead of guidance. Total revenue in the quarter increased by 16.0 percent to £1,387 million.
Carolyn McCall, easyJet Chief Executive said:
“easyJet has delivered a strong performance in the quarter right across the business.
“Our purposeful and disciplined growth continues to strengthen our market positions and we are seeing an underlying improving revenue trend.
“Although we expect capacity to continue to put pressure on yields, our progress this year has enabled us to upgrade this year’s PBT forecast and demonstrates that after a difficult 18 months of external challenges easyJet once again has positive momentum.”
However the company added that it expected continued pressure on yields, and that exchange rate movements are likely to have around a £20 million adverse impact to headline profit before tax compared to the six months to 30 September 2016.
Shares in easyJet are currently trading down 5.15 percent at 1,340.00 (1151GMT).
Mothercare shares drop after fall in online sales
Shares in baby care retailer Mothercare (LON:MTC) fell nearly 5 percent on Thursday, after a fall in online sales dampened investor confidence.
UK like-for-like sales rose 1.9 percent during the quarter, with the company entering the end of season sale with lower stocks and achieving a higher sell through rate.
However total sales fell 1.8 per cent with online sales growth slowing sharply, dropping to 3.3 percent in the second quarter.
International sales fared better, rising 2.2 per cent, but plunging 8.3 per cent with the boost from the Brexit-hit pound stripped out.
The group attributed the lower UK sales to the ongoing store closure programme, as part of an ongoing effort to cut costs. Mark Newton-Jones, Chief Executive Officer of Mothercare, said they “continued to make progress in the UK during the period.”
“Whilst online sales recorded a lower growth, in contrast to higher sales growth in store, we don’t believe this represents an underlying permanent shift in customer behaviour.
“In our International business, the challenging economic conditions in the Middle East continue and are impacting overall performance, and so the outlook remains volatile.”
Mothercare shares are currently trading down 4.47 percent at 98.40 (1104GMT).
Royal Mail shares reverse Tuesday’s gains to drag FTSE 100 lower
Royal Mail is one of the biggest fallers on the FTSE 100 index on Wednesday, losing the gains it made earlier in the week to trade down over 2 percent.
Shares in the postal group rose yesterday after it told investors yesterday that the unexpected election had given it an unexpected boost and meant that the fall in number of letters posted had been less than expected.
Shares rose on Tuesday on the news but fell again on Wednesday morning, dragging down the FTSE 100 by mid morning.
The company reported on Tuesday that total letter revenue in the UK fell by 4 percent and volumes dropped 6 percent in the first quarter to 25 June, with its UK Parcels, International and Letters division also seeing a 1 percent dip in underlying revenue.
Shares in Royal Mail (LON:RMG) are currently trading down 2.55 percent at 400.60 (1130GMT).
TUC urge government to tackle inequality in UK after IFS report
There is a 25 percent gap between the richest and poorest areas of Britain, prompting the TUC to urge the government to combat the problem.
The Institute of Fiscal Studies’ annual living standards, poverty and inequality report, released on Wednesday, found that whilst the gap between the richest and poorest households in the UK has narrowed since the recession of 2007-08, there remains significant geographical differences.
The report found London to be the most unequal part of the UK, but added that the incomes of low-income households in London rising by more 10 percent since 2000, whilst the incomes of high-income households have fallen by more than 10 percent.
The average income in the highest-income region in Britain, the South East, is 25 percent higher than in the lowest-income region, the West Midlands. The average income in the South East is now nearly twice as far above the national average as it was in the 1970s, at 13 percent compared with 7 percent.
Frances O’Grady, the TUC general secretary, said ministers could not shrug off findings and put pressure on the government to do more to tackle the problem of inequality in the UK.
Reckitt Benckiser sells food division to owner of Schwartz for $4.2bn
Reckitt Benckiser (LON:RB) has sold its food division to the owner of US spice and herb giant Schwartz, in a deal worth $4.2 billion.
McCormick & Co won the bid to acquire Reckitt Benckiser’s business, which includes French’s mustard as well as Franks’ RedHot and Cattlemen’s sauces.
The deal was confirmed by Reckitt in a statement on Tuesday, and will go some way to alleviate the debt the company has been dealing with since it bought baby formula maker Mead Johnson for $17.9 billion.
The chief executive of Reckitt Benckiser, Rakesh Kapoor, said: “Following the acquisition of Mead Johnson Nutrition, this transaction marks another step towards transforming RB into a global leader in consumer health and hygiene.”
Shares in Reckitt Benckiser are currently up 1.68 percent at 7,943.00 (1053GMT).
BREAKING: Inflation falls to 2.6pc in June
The UK’s inflation rate fell to 2.6 percent in June, the first fall since October last year driven by a drop in petrol prices.
The latest figure is down from 2.9 percent in May, official figures showed on Tuesday, but still remains ahead of wage growth. Average wage inflation stands at 2 percent, excluding bonuses.
It is the lowest inflation figure since February 2015, with fuel prices falling by 1.1 percent between May and June 2017, the fourth successive month of price decreases.