Silver rallies to two year high, Fresnillo follows
The anticipation of central bank intervention following the UK’s vote to leave the EU has driven Silver prices higher and today, hit a two year high,up 5% to $21 per ounce.
Since the UK’s decision to leave the EU, spot silver prices have rallied 19% as investors seek out safe haven assets, spot gold has only rallied 7.8% in the same period up to $1,351 per ounce, however.
Shares in London’s-listed silver miner Fresnillo, climbed 7% to the highest point since 2012. Over the past 12 months, the FTSE 100 Company has seen a 175% rise in its share price as the uncertainty of the EU Referendum has driven shares higher. Since the beginning of June, Fresnillo is up 83%.
The nature of Silver prices means they can easily alter with interest rate expectations and will often rise when central banks are forecast to ease monetary policy as policy actions could see a decline in value of other assets.
The sharp rise in silver is thought to be behind the recent announcement made by Bank of England governor Mark Carney who last week stated that further monetary policy action such as quantitative easing or a cut in interest rates may be needed to tackle what he described as “economic post-traumatic stress disorder” following the Brexit vote.
At 2:10pm BST Fresnillo PLC (LON: FRES) traded at 1,895.00 +135.00 (7.67%) remaining inside today’s FTSE top 10 risers alongside Rangold Resources (LON: RRS) who traded at 9,180.00 +405.00 (4.62%) 2:14pm BST
04/07/16
UK construction activity hits seven year low
The UK’s construction purchasing managers index (PMI) came in at 46.0 down from 51.2 in May, dropping below the crucial 50 mark.
A PMI index score of above 50 indicates growth, a rate below the crucial 50 figure means that output is in decline.
The uncertainty of the of the EU Referendum has been blamed for the nosedive in the UK’s construction sector to its lowest level since June 2009.
The dramatic fall in PMI is reported to be due to the decline in residential building amid the fall in activity in the commercial sector conceding its weakest performance six and a half years. Lower levels of activity have also seen a reduction in new work which has now fallen for the second month in a row having seen its highest low in December 2012.
Economists’ expectations were that the index would drop to 50.5 in June.
Tim Moore, senior economist at Markit, said:
“Construction firms are at the sharp end of domestic economic uncertainty and jolts to investor sentiment, so trading conditions were always going to be challenging in the run-up to the EU referendum. However, the extent and speed of the downturn in the face of political and economic uncertainty is a clear warning flag for the wider post-Brexit economic outlook.
“The vast majority of June’s survey responses were received ahead of the EU referendum, so the worry is that the ensuing political turmoil will hit construction spending decisions for some time to come.”
As the FTSE 100 has started to make a recovery following the outcome of the vote, shares in construction giants such as Taylor Wimpey remain low at -29% with company shares in Barret Developments and Persimmon’s both dropping almost 30%
The release of the report had an immediate impact as construction companies, house builders led the FTSE 100 down as Taylor Wimpey dropped 4% with British Land, Barret Developments, Persimmon and Berkeley Group all falling more than 3%.
04/07/2016
FTSE 350 sectors post EU Referendum
John Wood Group points to a mixed future
John Wood PLC (LON:WG) today announced in its trading update for the six months to June 2016 that it expects earnings to remain 20% lower in 2016 compared to 2015.
The company said:
“We expect financial performance in the first half of 2016 to demonstrate the benefits of: our asset light, predominantly reimbursable business model; our attention to management of utilisation; and significant overhead cost savings from reorganisation, delayering and back office rationalisation.
Overall the outlook for the full year has not changed and there is no change to earnings before interest, tax and amortisation guidance of around 20% down on 2015 as given in May,”
Wood said that the current environment remains challenging for both volume and pricing but remains firm on its leading positions in brownfield operations having renewed contracts with Chevron, Enquest, Nexen, Shell, Talisman, Taqaand co.
Furthermore the company said it continues to see areas of future growth in its engineering sector despite saying its ability to forecast future projects remained difficult due to the lack of large-capax projects coming into the market.
Wood stated that plans to increase its dividend per share by a double-digit percentage for 2016 remain in place.
Following its trading announcement, Shares in Wood Group dropped 19p (2.8%) to 651.5p at EMT
30/06/2016
Tullow Oil earnings fall in first half
Tullow Oil PLC (TLW:LN) today said that it expects a drop in earnings for the first half of the year 2016 due to a 24% fall in its daily average oil and gas output.
The FTSE 250 Company estimates that its West African oil production sector fell to 51,000 barrels per day with numbers standing at 66,500 this time last year. The company now estimates that oil production will be between 62,000 to 68,000 barrels of oil a day this year, a fall from an estimated 73,000 to 80,000 barrels in February 2016.
As a result, the company’s average selling price dropped $10 per barrel to $61.
Total revenue dropped from 37.5% to $500m as gross profit also declined by a third to $200m.
The firm announced that oil from the TEN project in Ghana which is 96% complete will be expected ‘imminently’ (next three-six weeks) The project has remained both on budget and on schedule from since it’s opening in 2013 and is forecast to produce 23,000 barrels of oil a day in 2016.
Production at its Jubilee field in Uganda however could cost the company between £100-150 million as production due to interruption in March due to technical difficulties and will now need a further 8-12 weeks during the first half of 2017 to fix. Production however from the Jubilee site stabilized a gross rate in June of 90,000 barrels per day.
30/06/2016
Greene King profits soar despite Brexit impact
British brewer Greene King announced an impressive 61 percent rise in pre-tax profit for the year to May 1st, despite seeing a slowdown in business in the run-up to the EU referendum.
The group saw revenues reach £2.1 billion for the first time ever, up 57.6 per cent from £1.5 billion last year. Earnings per share grew to 64.4p, up 57.5 per cent on the 40.9p reported last year, with the dividend was also rising by 7.7 per cent to 32.05p per share. These results are the first reported by Greene King since it acquired the rival Spirit pubs chain, with CEO Rooney Anand calling the merger process over the past year as “transformational”.
However, despite good results thus far, Anand took the opportunity to warn investors of a likely dip in sales post-referendum. Anand gave a nod to the “resilience” of Greene King, before adding that it was likely that “consumer confidence will be affected by Brexit in the near-term”.
Greene King have seen its share price dip 15 percent since the vote, with little recovery; the company is currently trading down 0.26 percent at 757.50 (1028GMT).
29/06/2016
Morning Round-Up: Vodafone considers HQ move, FTSE opens higher, Toyota recalls 4m cars
Vodafone HQ may move elsewhere after Brexit
Telecoms giant Vodafone has warned that it may move its headquarters out of the UK, if a post-Brexit agreement with the EU is unfavourable to business.
In an emailed statement the company highlighted the importance of the EU’s free movement of capital and goods, saying it would take “whatever decisions are appropriate” once an agreement has been reached.
However, it said it was too early to “draw any firm conclusions regarding the long-term location for the headquarters”. The loss of Vodafone from the UK would have a significant impact on business sentiment, as well as British jobs; the company currently employs 13,000 people, with an operating division at Newbury, Berkshire, and a headquarters in London. FTSE opens higher for second day straight Britain’s top share index opened higher again this morning, as worry over an immediate exit from the EU recedes. The FTSE 100 index is currently up 1.68 percent (0932GMT), in positive territory for the second day in a row after crashing on Friday post-Brexit. Investor sentiment has been calmed by Prime Minister David Cameron’s comments yesterday that he was unlikely to trigger Article 50 until a new Prime Minister in place, possibly in several months time. Banks have started to recover losses, with the UK banking index and the life insurance index rising 2.3 percent and 2.8 percent respectively. Toyota recalls 4 million cars Japanese carmaker Toyota has announced the recall of over 4 million of its vehicles, due to possible faults with both the fuel emissions control units and airbags. 2.87 million vehicles worldwide may be affected by a fault with their evaporative fuel emissions control unit, covering vehicles made between 2006 and 2015. The Prius model, the Auris compact hatchback and Corolla compact models may all have issues. Earlier the same day, Toyota also announced the need to recall 1.43 million Prius and Lexus models worldwide due to a possible defect with the airbag inflator.29/06/2016
Rolls-Royce reassures UK commitment
Rolls- Royce Holdings PLC (LON:RR) today released a statement confirming it’s continued commitment to the UK following Thursday’s vote to leave the EU.
The engineering giant said:
“Although this is not the outcome the company would have chosen, Rolls-Royce remains committed to the United Kingdom where we are headquartered, directly employ over 23,000 talented and committed workers and where we carry out a significant majority of our research and development”
The FTSE 100 firm also made clear that the UK’s decision to leave the EU will have ‘no immediate impact on day-to-day business’ but has warned that the medium to long term effect of the vote will be dictated by the negotiations and trade deals established between the UK and the EU in the next stages.
In its statement the company also said that overall trading in the first five months of the year has been ‘broadly’ in line with expectations set out in its annual results earlier this year.
The British company’s cost-cutting scheme is ‘on track’ as the company seeks profitable growth as its share price halved leading to changes in senior management. The scheme is expected to produce a stronger performance to the second half of the year.
The Company said:
“As outlined in May, underlying profit before financing charges and tax for the first six months of the year is expected to be close to breakeven, with our performance significantly weighted towards the second half”
28/06/16
UK Loses Triple- A credit rating
Yesterday the UK lost its top AAA credit rating from Standard & Poors and Fitch as a result of the vote to leave the European Union.
The decision arrived shortly after Chancellor George Osborne said that the UK is “about as strong as it could be” to confront future economic challenges.
The ratings agency Standard & Poor said:
“In our opinion, this outcome is a seminal event, and will lead to a less predictable, stable, and effective policy framework in the UK,”
“The negative outlook reflects the risk to economic prospects, fiscal and external performance, and the role of sterling as a reserve currency, as well as risks to the constitutional and economic integrity of the UK if there is another referendum on Scottish independence,”
Rival agency’s Fitch and Moody’s also downgraded the UK’s rating from AA to AA+ having already removed Britain’s status as an AAA rating before the referendum campaign started.
In a statement released yesterday Fitch said:
“Fitch believes that uncertainty following the referendum outcome will induce an abrupt slowdown in short-term GDP growth, as businesses defer investment and consider changes to the legal and regulatory environment.”
“Medium-term growth will also likely be weaker due to less favorable terms for exports to the EU, lower immigration and a reduction in foreign direct investment. An adjustment in the value of sterling and changes in the business environment could also affect growth.”
The loss of a Triple – A rating is the latest in a number of blows to the economy as sterling recently plunged to its lowest point in 31 years following the Brexit vote while the equity markets try to overcome the crisis.
The decision means that Britain’s position on the international market is at a greater risk as the move will inevitably effect how much the government can borrow on the international stage.
28/06/16
Redrow remains confident, shares up over 8 percent
Housebuilder Redrow remains confident in the wake of the European referendum, saying it expects this year’s profit before tax to come in above analysts’ expectations.
The company’s order book for private housing at the end of June stood at £870 million, over 50 percent higher than this time last year, with the average selling price of private homes up 10 percent to £328,500. On these figures, Redrow expects 2016 profit before tax to come in above the £240 million currently expected.
Redrow also confirmed that it expects the UK housing market to be largely unaffected by a Brexit vote, with housing sites remaining “busy”:
“The fact remains that there is a long-term underlying demand for new homes following decades of under-supply. This chronic shortage of housing leaves market fundamentals unchanged.”
Shares in Redrow jumped 8 percent this morning after the statement, and are currently up 2.82 percent at 302.80 (0949GMT).
28/06/2016