FTSE soars in broad based rally after Yellen comments

UK Investor Magazine
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FTSE soars in broad based rally after Yellen comments
Markets cheered Janet Yellen’s press conference this morning after she clarified the Federal Reserve’s outlook on the economy and eased fears over a rate hike. The key aspect of Yellen’s speech was her reduction in uncertainty of whether the Federal Reserve was going to raise rates whilst the economy faltered. She reaffirmed the view that the Federal Reserve would only hike rates when the economy was strong enough to withstand a tightening in monetary policy. Expectations of inflation and market volatility were also noted as the reason why the Fed held off raising rates last week, alleviating market fears that the Fed hadn’t hiked because they saw a softer US economy. Whilst Yellen painted the picture of a Fed who were only going to hike into a strengthening economy, she did say that it was likely that rates would rise this year. These comments suggest rates were not raised last to give the FOMC time to judge any impact from the recent market volatility. Markets took Yellen’s confidence of a 2015 rate hike as a sign that the underlying economy was strong and would support corporate earnings going forward. The FTSE 100 was up over 2% in mid-morning London trade.

Volkswagen to elect new Chief Executive

Miranda Wadham
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Volkswagen to elect new Chief Executive
The board of Volkswagen will meet today to choose a new Chief Executive after the company was hit by an emissions test scandal earlier this week. Ex-Chief Executive Martin Winterkorn resigned on Wednesday. VW have been accused of rigging emissions tests in the US, with thousands of cars sending out diesel emissions considerably higher than found in tests. Porsche Chief Executive Matthias Mueller is reportedly the front runner for the job, gaining the task of steering the company through what will arguably be the most difficult period in its history. Customers and car dealers have shown frustration at the lack of information on the scandal, and the new CEO will be given the difficult job of regaining consumer trust. Both Europe and the US have started further enquiries, with the UK regulator launching its own investigation on Thursday.

Japanese shares end higher, Asia mixed

Miranda Wadham
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Japanese shares end higher, Asia mixed
Japanese shares closed higher on Friday, as strong economic data pulled its market up from a 3 percent loss the previous day. Japan’s Nikkei index ended a volatile day up 1.8 percent after data showed Japan’s core consumer prices had dropped for the first time since the Japanese Prime Minister Shinzo Abe began his stimulus programme. The CPI, which includes oil but not fresh food prices, decline 0.1 percent on a year ago. Asian markets were hit by the news earlier this week that China’s factory activity has fallen to its weakest since 2009. However, home prices have risen for the fourth consecutive month, signaling growth in the country. The Shanghai Composite fell 1.5 percent, with the Hang Seng closing up 0.1 percent.

The FTSE 100 rallies after strong Eurozone PMI, commodity stocks lead gains

UK Investor Magazine
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The FTSE 100 rallies after strong Eurozone PMI, commodity stocks lead gains
The FTSE 100 recovered some of the ground lost yesterday as commodity related companies pushed higher. Miners in particular were heavily hit yesterday on fears of a Chinese slowdown and a raft a downgrades in the sector. Despite last night’s dismal Caixin Manufacturing PMI release, mining stocks rallied in a form of ‘sell the rumour, buy the fact’ rebound. Oil related companies also rallied in tandem with the underlying price. “There’s a bit of support coming through the oil price, which is acting as a trigger for the FTSE to reclaim some ground,” said Hantec Markets’ analyst Richard Perry to a Reuters reporter. Adding to the risk on mentality was strong manufacturing data from the Eurozone which investors cheered after the poor gauge of factory activity from China. Regardless of today’s rally, some analysts still the FTSE 100 in a technically bearish formation and feel the lows of 5768 could well be tested unless the FTSE 100 can make a break above 6250.

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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0
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.
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