Chinese Manufacturing PMI drops to 6 1/2 year lows

UK Investor Magazine
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Chinese Manufacturing PMI drops to 6 1/2 year lows
Chinese factory activity has slowed once more in an early indication of Manufacturing PMI. Most components of the index slowed and worryingly, at faster pace than last month’s reading. The Caixin Manufacturing PMI came in at 47.0, well below analyst estimates of 47.5. Last night’s reading was also the lowest for 6 ½ years. The Caixin Manufacturing PMI recently replaced ‘HSBC PMI Manufacturing’ and is an early indication of Manufacturing PMI, with only a small proportion of purchasing managers being surveyed. The news came a day after the Asian Development Bank lowered its Chinese GDP growth target to 6.8%, below the government’s 7% official target. The latest reading on the Chinese economy will do nothing to ease investor fears of a slowdown in the world’s second largest economy as the economic picture gradually deteriorates. Oil and copper dropped to session lows in Asian trading following announcement as traders priced in lower demand for major commodities. The next installment of PMI figures is on 30th September when we will receive the final reading of Caixin Manufacturing PMI and the government’s official reading of PMI, which may provide some respite for equity bulls as the governments reading is usually higher than Caixan’s reading.

What is the impact of a rate hike on the FTSE 100?

UK Investor Magazine
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What is the impact of a rate hike on the FTSE 100?

What is the impact of a rate hike on the FTSE 100?

This release covers the behavior of the FTSE 100 following an initial rate hike on three separate occasions in the last 35 years.

 

The analysis contained is essential reading for investors in UK listed companies as it details the impact of a rate hike on:
  • FTSE 100 price movement
  • Inflation
  • Unemployment
  • UK GDP
The paper will give you the market reaction to a rate hike and insight that may help you in the positioning of your portfolio in the coming months.

 

We also explore the impact on the US stock markets following an in initial rate by the Federal Reserve, following the decision take keep rates at 0.5% for a little while longer.
Rate hike cover


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Chinese President welcomes foreign firms in US speech

Miranda Wadham
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Chinese President welcomes foreign firms in US speech

Chinese President Xi Jinping has reiterated that foreign firms are welcome in China and that Bejing would not manipulate its currency to boost exports, in a speech given in Seattle to mark the beginning of his state visit.

He conceded that Beijing does engage in hacking, but confirmed that China would co-operate with Washington on the issue. Relations have been strained between the countries on both of these issues. Mr Xi will meet Barack Obama at the White House on Friday.

In Asia, markets fell after further the release of further disappointing economic data. The preliminary Caixin manufacturing purchasing managers’ index showed that China’s manufacturing sector is shrinking at the fastest pace for six-and-a-half years.

The preliminary Caixin manufacturing purchasing managers’ index (PMI) fell to 47 in September, below forecasts of 47.5 and down from 47.3 in August. The Shanghai Composite dropped 2.2% to 3,115.89 on the news, with the Hang Seng index in Hong Kong closing down 2.3% at 21,302.91.

Volkwagen directors hold emergency meeting over emissions scandal

Miranda Wadham
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Volkwagen directors hold emergency meeting over emissions scandal
Senior directors of German carmaker Volkswagen are to hold an emergency meeting to discuss the company’s future, after the Volkswagen was found to have manipulated its diesel car emissions tests. The U.S. Environmental Protection Agency (EPA) has warned that Volkswagen could face penalties of up to $18 billion for cheating emissions tests. 11 million of its diesel vehicles contain software that evades emissions controls, far more than the 482,000 cars originally identified. Volkswagen CEO Martin Winterkorn said in a video statement on Tuesday: “Millions of people across the world trust our brands, our cars and our technologies. I am endlessly sorry that we have disappointed this trust. I apologize in every way to our customers, to authorities and the whole public for the wrongdoing.” He has shown no intention of resigning. The company said it would set aside 6.5 billion euros in its third-quarter accounts to help cover the costs and help regain consumer trust.

Miners drag FTSE 100 below 6000

UK Investor Magazine
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Miners drag FTSE 100 below 6000
The FTSE 100 sank on Tuesday morning on renewed fears of a Chinese slowdown hit commodity related companies. Shares in Rio Tinto (LON:RIO), BHP Billiton (LON:BLT), Antofagasta (LON:ANTO) and Anglo American (LON:AAL) were all down over 5%, after sector wide downgrades by Credit Suisse. Among the downgrades, Antofagasta had its price target slashed to 510p and Glencore’s lowered to 175p. Iron ore fell 1.7% on the Dalian Exchange in China, adding to investor woes. “It’s a continuation of the negative trend for basic resources companies as we have a high degree of uncertainty regarding emerging market economies. We have seen some negative earnings revisions for the sector in the past weeks,” Christian Stocker, equity strategist at UniCredit in Munich, said to Reuters. “If China manufacturing numbers come in better than expected tomorrow, we could see a rebound in mining stocks for some days, but the sector’s medium-term outlook remains bearish.” By mid-morning the FTSE 100 was down around 2% in London trading.

Shire tops FTSE 100 after European approval of Intuniv

UK Investor Magazine
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Shire tops FTSE 100 after European approval of Intuniv
Shire Pharmaceuticals rallied sharply this morning after it received approval for Intuniv, an ADHD treatment. “The approval of INTUNIV marks a significant advance in the treatment of ADHD in children and adolescents in Europe. Previously, physicians had only one licensed non-stimulant option for these patients,” said Perry Sternberg, Shire. Shire Pharmaceutical’s share price has been on a rollercoaster ride in the last year as investors contend with takeover talks and the results of clinical trials. “Traders obviously hope new indication for Intuniv can help replace some of the lostsales since the drug went off-patent and began suffering generic competition,” Mike van Dulken, head of research at Accendo Markets, said to a Reuters reported. “Continued progress by Shire in ADHD keeps it ahead of game to develop the next preferred treatment, to help it recapture lost market share to what is inevitable generic competition over time,” he added. Shire specialises in rare diseases and this focus has been of particular interest to overseas companies such as AbbVie who only called off takeover talks after US tax rules changed, making the deal unattractive. Shire have hit headlines for attempts to buy Baxalta in a $30 billion deal and has also been rumoured to be eyeing up other potential tie ups.

Janet Yellen keeps US interest rates on hold

UK Investor Magazine
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Janet Yellen keeps US interest rates on hold
Last night Janet Yellen and her colleagues at the Federal Reserve announced they were to keep the US benchmark interest rate at a record low after a much anticipated two day meeting. Going into the meeting the futures markets had priced in around a 30% chance of hike and a survey of economist also pointed to keeping rates unchanged. As expected, Janet Yellen blamed the recent market volatility stemming from Chinese growth concerns; “Developments we saw in financial markets in August partly reflected concerns of downside risk to Chinese economic performance and the deftness with which policymakers are addressing those concerns” said Chairwomen Yellen. US stock initially rallied but later fell back after the press conference. Janet Yellen said the committee was also held back by the low rate inflation which is well beneath the Federal Reserve’s 2% target, the primary mandate of the FOMC. Another mandate of the Federal Reserve, Full Employment, was a variable they seemed satisfied with, they noted the jobs market continued to improve as the unemployment rate fell and the quality of jobs increased. Taking into consideration the comments of Yellen during the conference, it appears that in absence of the market volatility three weeks ago , there would have been a rate hike last night. “We’d like to have a little bit more confidence,” Yellen says. In a market reaction to the decision, the Dollar weakened and European stocks fell over the China concerns Yellen raised.

Antofagasta forced to halt copper production following earthquake

UK Investor Magazine
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Antofagasta forced to halt copper production following earthquake
FTSE 100 Copper miner, Antofagasta (LON:ANTO), has been forced to shut down one of its mines following an 8.3 magnitude earthquake in Chile. Chile is the world’s largest copper producing nation and the disaster overnight helped lift the price of copper to two month highs in Asian trading. There is not yet any indication of when the mines will be back online. Codelco was also forced to shut down ones of their mines, the combined output of the Antofagasta mine and Codelco is roughly 600,000 tonnes per year. If there is any lasting impact on production it would add to Glencores removal of 400,000 tonnes of production put in place earlier this month by closing African operations. The possible 1m tonnes of halted production would equate to roughly 5.5% of global production (International Copper Study Group). Some analysts see the reduced output as a potential catalyst for a move to the upside if the global economy, particularly China, improves. “Anything that has potential to restrict supply will have more of an effect on the price when things pick up,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance So far, doubts over the strength of the Chinese economy have kept a cap on prices and copper remains in a medium term downtrend.

Disappointing data fuels fears of slowdown in Japan

Miranda Wadham
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Disappointing data fuels fears of slowdown in Japan
Disappointing data released on Wednesday by the Bank of Japan has fuelled fears that the country is seeing an economic slowdown on the back of the recent troubles in China. The bank said in its monthly report that Japanese factory output will remain flat in the current quarter. Although factory output was originally expected to pick-up in October-December is clouded with uncertainty as shipments to Asia take a hit from falling demand in China. The bank said in a statement: “Based on surveys we are conducting on companies, industrial output is expected to move sideways in July-September from the previous quarter. Output is expected to rebound in October-December, although there is strong uncertainty on overseas developments.” This data furthers concerns that Japan will find it harder than previously anticipated to recover from a shrinking economy in the second quarter. However, Asian shares were up on Wednesday, following a similarly strong performance from Wall Street. Japan’s benchmark Nikkei 225 index ended up 0.8% at 18,171.60 and Chinese shares also traded higher, recovering some of the ground lost on Tuesday when the mainland benchmark index lost 3.5%. The Shanghai Composite was up by 1.9% to 3,062.15, while Hong Kong’s Hang Seng index gained 2.2% to 21,938.13. However, investors remain cautious ahead of the decision by the US Federal Reserve on Thursday as to whether rates will rise for the first time in nearly ten years.

Inditex profit soars on strong Spanish demand

Miranda Wadham
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0
Inditex profit soars on strong Spanish demand
Shares in Spanish retail giant Inditex (BME:ITX) are up nearly 3.5 percent this morning, after the group announced strong half yearly results. Profits at the world’s largest clothes retailer were up 26% on the year at €1.16bn (£853m) in the second quarter. Like-for-like sales also rose 7%. The group cited a strong revival in Spain and warm weather in Europe as reasons for the positive change. The company added 10,000 jobs worldwide, with 25% of them in Spain, and the addition of several stores in new countries means they now sell their products online in a total of 28 markets. The Inditex group, who own Zara, Pull & Bear, Massimo Dutti, Bershka and Oysho, have an advantage over competition in that they source their products close to the point of sale, making it easier to keep up with changing demands. Their results come just after rival Hennes and Mauritz disclosed its weakest monthly sales growth in August in more than two years.  
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