05/05/2016
Service sector slowest in three years – Markit
Growth in the UK’s services sector, the key to the UK’s economic growth, fell to its weakest in more than three years in April.
According to the latest survey by Markit, the Business Activity Index fell sharply to 52.3 from 53.7, the lowest since February 2013. Any figure above 50 shows growth.
Chris Williamson, chief economist at Markit, commented:
“The slowdown in the service sector follows similar weakness in manufacturing and construction to make a triple whammy of disappointing news on the health of the economy at the start of the second quarter. The PMI surveys are collectively indicating a near stalling of economic growth.”
A Brit’s guide to summer investing
With the summer months fast approaching, investors are already looking for new investment ideas that can maximise their returns. Below is every Brit’s guide to summer investing.
Stocks – trade them sparingly
Many investors are familiar with the phrase, “Sell in May and then walk away.” That’s because May 1 represents the end of the strongest six months of the year for stocks, according to the Halloween trading strategy. This strategy has rightly noted that stocks perform better in the winter months than in the summer. Investors abiding by this strategy enter into stocks on October 31 (Halloween) and sell six months later on May 1.
This doesn’t mean that no one trades stocks after May. You just need to be much more meticulous in your picks. The FTSE 100 Index – London’s benchmark stock gauge – has had a dismal year, but not every sector has performed badly. Beverages, chemicals, food and drug dealers, industrial engineering, industrial metals and miners are just some of the FTSE sectors that have outperformed the market average in 2016.
Precious metals – ride the safe haven rally
Gold prices have surged over 16% in 2016, as the combination of volatile stock markets and slowing global growth have boosted precious metals demand. The precious metals rally hasn’t been limited to just gold. Silver prices have outperformed the yellow metal through the first four months of the year, rising nearly 18% over that period.
The gold-silver ratio, which is used by investors to determine when to buy and sell precious metals, has plunged in recent weeks. As of April 15, the gold-silver ratio was 75.61. This essentially means it requires 75.61 ounces of silver to buy one ounce of gold bullion. The ratio was as high as 83.5 just a few months ago.
According to analysts, silver has a lot more going for it than just haven demand.
“Silver prices have benefited from the recent upswing in gold prices, but are also supported by a collapsing base metal industry, which is slashing mining and exploration projects to counteract weak Chinese demand,” wrote Sam Bourgi in a March 21 article on Economic Calendar. “About two-thirds of the world’s silver output is a by-product of base metal extraction. As producers slash output of zinc, copper and led, less of the grey precious metal is being unearthed.”
A weakening US dollar generally adds credibility to precious metals. According to the CME FedWatch Tool, which allows investors to track expectations of when the US Federal Reserve will raise interest rates, US policy will remain highly accommodative for the rest of the year. Low interest rates are often a boon to precious metals because they keep the dollar bulls at bay. Please rephrase
Sterling volatility
Pound sterling has had a rough year. At its lowest point, it was trading at more than seven-year lows against the US dollar. Much of the decline has been attributed to fears about Britain’s upcoming vote on European Union membership, which is slated for June 23. Investors may expect a great deal of volatility for the pound before and after the vote (there’s no predicting what would happen should Britain vote to leave the EU). Brexit-induced volatility might create opportunities for the GBP/USD and EUR/GBP pairs. However, multi-year lows are unlikely to be sustained in the event that Britain votes to stay in the EU.
According to a recent YouGov poll, the Remain camp holds a slim lead two months before the vote. YouGov found that 40% of Brits wanted to remain part of the EU versus 39% who wanted to leave. Sixteen percent were undecided and 5% did not intend to vote.
According to Bloomberg’s Brexit Tracker, there’s only a 22% chance that the UK leaves the 28-member EU on June 23. However, even Bloomberg realizes polls are never perfect. Polling for the 2015 UK general elections was notoriously bad, according to the British Polling Council. Most polls showed a close race between the Conservative and Labour parties in the run-up to the 2015 elections. The result? The Conservatives trounced the competition, winning their first outright majority since 1992.
Stay abreast of the market
As you’ve no doubt noticed, the outlook on the financial markets can change rather quickly. No one would have predicted last summer’s epic stock market collapse, which wiped trillions of dollars from the global exchanges. With China’s economy slowing even further in the first quarter, the country’s central bank may resort to drastic moves to curb capital flight from the country.
Aggressive monetary policy in other parts of the world is also intended to shore up investor confidence. Don’t be surprised if the Bank of Japan announces plans to ease monetary policy even further in the coming months or for the European Central Bank to defend negative interest rates.
On the whole, 2016 was forecast to be a low-yield environment. Equity markets have performed well since mid-February, but it took a massive selloff in the first six weeks of the year to create the illusion of strong performance. Make no mistake, all signs seem to indicate we are at the tail end of the bull market.
To keep up to date on the latest developments in the global financial markets, be sure to follow the financial calendar.
For more information, visit www.easymarkets.com
Nikolas Xenofontos, Director of Risk Management at EasyMarkets on 05/05/2016Risk warning: Forward Rate Agreements, Options and CFDs (OTC Trading) are leveraged products that carry a substantial risk of loss up to your invested capital and may not be suitable for everyone. Please ensure that you understand fully the risks involved and do not invest money you cannot afford to lose. Our group of companies through its subsidiaries is licensed by the Cyprus Securities & Exchange Commission (Easy Forex Trading Ltd- CySEC, License Number 079/07), which has been passported in the European Union through the MiFID Directive and in Australia by ASIC (Easy Markets Pty Ltd -AFS license No. 246566).
Morning Round-Up: Morrisons Q1 success, Trinity Mirror close new paper, Rolls Royce stable
Morrisons reports success in Q1
Morrisons has reported its second consecutive quarter of positive results, suggesting CEO David Potts may be beginning to turn the store around.
Britain’s fourth largest supermarket has struggled over the past four years, reporting consistent profit decreases. However, Potts has implemented a scheme to revive the flagging chain, improving store standards, cutting prices and tailoring stores which now seems to be having an effect.
Sales at stores open over a year, excluding fuel, rose 0.7 percent in the 13 weeks to May 1st, with like-for-like transactions growing 3.1 percent. Volume growth was “strong”.
“We are of course pleased with a second consecutive quarter of positive lfl (like-for-like) sales, which demonstrates our aim to stabilise trade is taking effect,” said Potts.
Shares are up 2.03 percent at 191.50 (0909GMT).
Trinity Mirror to close ‘New Day’ paper
Newspaper publisher Trinity Mirror has announced the closure of the ‘New Day’ publication after just nine weeks.
Circulation was below expected figures, with the new paper failing to attract sales in a fiercely competitive market. In a trading statement, the company described trading conditions as “volatile, but that performance would remain within expectations.
Group revenue fell 8.6 percent on a like-for-like basis, with publishing revenue declining by 8.5 percent and and circulation falling 3.7 percent.
However, shares have risen 4.87 percent on the news of the closure of the new paper, trading at 118.50 (0914GMT).
Rolls Royce show stability with statement
Rolls Royce defied expectations by confirming it was in line for its 2016 profit guidance, after issuing profit warnings three times in the past year.
The aeronautical engineering company had a troubled 2015, but expect to break even in the second six months of this year.
Analysts expect Rolls-Royce’s 2016 pretax profit to halve to 642 million pounds according to Thomson Reuters data, down from 1.36 billion in 2015.
Shares in Rolls Royce still fell over 5 percent on the news, currently down 5.-4percent at 612.50 (0917GMT).
05/05/2016
Shell profits fall in first statement since BG deal
Oil giant Royal Dutch Shell continue to be hit by low oil prices in the first quarter, cutting its 2016 spending by a further 10 percent after completing the $54 billion acquisition of BG Group.
The group’s first earnings report since the acquisition of BG was better than expected by analysts, despite a 58 percent drop in profits to $800 million, from $4.8 billion a year earlier.
Shell cited continuing low oil prices as a reason for the fall in profits and have since come under pressure from shareholders to cut costs, announcing a decrease in investment from $33 billion to $30 billion.
Shell chief executive Ben van Beurden commented: “Downstream and integrated gas businesses are delivering strong results and underpinning our financial performance despite continued low oil and gas prices”
“The combination with BG is off to a strong start, as a result of detailed forward planning before the completion of the transaction. This will likely result in accelerated delivery of the synergies from the acquisition, and at a lower cost than we originally set out,” he added.
04/05/2016
Morning Round-Up: Sainsbury’s and Next down, Imperial Brands meets expectations
Sainsbury’s shares fall on results
Supermarket chain Sainsbury’s have seen shares fall this morning, after its CEO warned that trading conditions in the “fiercely competitive supermarket sector” would remain tough.
Underlying profits fell to £587 million for the year to 12 March, down from £681 million in the previous year.
Pre-tax profits for the year were £548 million, better than expected after last year’s £72 million loss.
“The market is competitive, and it will remain so for the foreseeable future,” said Chief Executive Mike Coupe on Wednesday. “We believe we have the right strategy in place.”
The supermarket was hit by its own price cuts as well as a decline in food prices in general.
Shares (LON:SBRY) are currently trading down 3.99 percent at 374.30 (0907GMT).
Next issues profit warning
Clothing retailer Next has issued its third downgrade in five months, warning that sales could fall as much as 3.5 percent by the end of the year.
The poor performance of the last six weeks may be indicative of weaker underlying demand for clothing and a potentially wider slow-down in consumer spending,” Next said in its statement on Wednesday.
The company cited tough weather conditions in comparison to last year as the main reason for the fall.
However, investors have reacted well to the news, with shares in Next (LON:NXT) trading up 2.45 percent at 5,100 (0915GMT).
Imperial Brands meet outlook expectations
British tobacco company Imperial Brands (LON:IMB) saw a fall in first-half sales, but managed to maintain full-year outlook expectations.
Imperial, who make Davidoff and Gauloises cigarettes, saw sales of 133.9 billion cigarettes in the six months to 31 March, below expectations of 136 billion. Tobacco net revenue was £3.4 billion. However, operating profit came in above analysts expectations at £1.64 billion.
The Group’s results come just as major cigarette companies lose a battle in the EU high court against plain-packaging cigarettes, which may well be introduced next month.
04/05/2016
Pfizer shares up on strong quarter
US pharmaceutical giant Pfizer saw shares soar in pre-market trade this morning after a favourable earnings release.
Revenue for the quarter stood at $13.01 billion, well above last year’s figure of $10.86 billion. The company cited a sales boost of its new treatments for cancer and its Hospira acquisition as reasons for the increase.
Pfizer adjusted their 2016 revenue expectation upwards and is now set to be between $51 billion to $53 billion, up from $49 billion to $51 billion.
Shares of the company were up 3.2 percent at $33.86 in premarket trade.
Morning Round-Up: Liberty House place bid, Just Eat shares soar, Lufthansa slows growth
Liberty House to bid for Tata Steel plants
Metals group Liberty House will submit a letter of intent to buy the British steel plants put up for sale by Tata Steel, possibly saving 11,000 jobs.
This will be the first bid since Tata announced their intention to sell.
A spokeswoman confirmed that the Group has put in “place a strong internal transaction steering committee and panel of leading external advisers to take the bid forward.”
Just Eat shares up over 8 percent
Shares in takeaway site Just Eat have risen over 8 percent this morning as the group upgraded their full year guidance.
Highlights from the announcement showed order numbers for Q1 rising 57 percent year-on-year to 31.5 million, with its full year revenue expectation increased to £358 million. Underlying EBITDA for the full year is now expected to be between £102-104 million, up from the previous guidance of £98-100 million.
CEO David Buttress added:
“We have had an excellent start to 2016 and I am delighted with the Company’s performance and the momentum in the business”.
The company’s shares (LON:JE) are currently up 9.21 percent at 418.82 (0933GMT).
Lufthansa slows growth after reporting loss, shares fall
Lufthansa has announced plans to slow the pace of growth plans year, after being hit by stiff competition from low-cost airlines.
The German airline reported a net loss of €8m in the three months to the end of March – a sharp fall from the €425 million profit reported a year earlier. Seat growth will now be at 6 percent this year, instead of the 6.6 percent initially planned. The announcement comes just days after British Airways owner IAG also decided to slow the roll-out of growth plans, after being hit by a lack of demand after European terror attacks. Shares have fallen 6.7 percent on the news this morning, at 12.80 (0937GMT).03/05/2016
HSBC reports better-than-expected drop in profits
HSBC has reported a 14 percent drop in profits for the first quarter, hit by “extreme levels of volatility” in financial markets throughout January and February.
However, analysts had expected the fallout to be far worse for the bank, with chief executive Steve Gulliver commenting that it had been “resilient in tough market conditions”. “Market uncertainty led to extreme levels of volatility in January and February, which affected our ability to generate revenue in our markets and wealth management businesses. However, our diversified, universal-banking business model helped to cushion the impact through growth in other parts of the bank,” he added. Profit before tax stood at $6.1 billion for the three months to March, down from $7.1 billion a year ago. Its adjusted revenue for the first quarter amounted to $13.9 billion, a 4 percent drop from the same time last year. Shares in HSBC have moved up on the news, currently trading up 2.50 percent at 463.75 (0811GMT).03/05/2016
Exxon Mobil beats expectations in tough market
Exxon Mobil, the world’s largest publicly traded oil producer, reported a sharp profit drop after being hit by low oil prices and tough market conditions.
The company reported a $1.8 billion profit, a sharp decline from $4.94 billion in the same period last year and its lowest quarterly profit since 1999.
However, the results remained better than expected by analysts, with CEO Rex Tillerson attributing this to the company’s large size and cash flow. He said:
“The organization continues to respond effectively to challenging industry conditions.”
Exxon Mobil’s share price is reflecting the positive earnings, up 1.12 percent at 89.02 (1519GMT)
Earnings reports: IAG, AstraZeneca, Amazon, Restaurant Group
IAG, the owner of British Airways and Iberia, has announced plans to slow expansion plans in the wake of weaker demand after the Brussels attacks.
The group reported pre-tax profits of €124 million for the first quarter, compared with a loss of €37 million in 2015. However, shares have dropped 3.45 percent this morning on the news that they will be scaling back their planned expansion of routes.
Shares are currently down 3.81 percent at 530.00 (1142GMT).
AstraZeneca saw a 12 percent fall in underlying earnings in the first quarter, broadly in line with expectations.
The pharmaceutical company have been hit by drug patent expiries, with analysts expecting weak earnings throughout 2016 and 2017.
However, share price is broadly unaffected by the news, currently up 0.13 percent at 3964.50 (1146GMT).
Online retail giant Amazon has seen another strong quarter, reporting a $513 million profit and a 28 percent jump in sales.
The company’s investment into technology appears to have paid off, with their Kindle and Fire tablets pushing sales to $29.1 billion.
Restaurant Group, the owner of Chiquito and Frankie & Benny’s, saw shares take a dive this morning after cutting their profit forecast.
The group are now predicting full-year like-for-like sales will fall by between 2.5 percent and 5 percent, with profits between £74 million and £80 million.
Restaurant Group is currently trading down 23.91 percent at 284.91 (1156GMT).
29/04/2016