Markets Round-Up on 23rd October 2017.
Stock Markets
U.S. stocks surged to fresh records on Friday and boosted other equity markets after US lawmakers took a key step toward enacting the tax reform plan sought by President Donald Trump. The S&P 500 rose 0.5% to 2575.2, the Dow was up 0.7% to 23,328.6 and the Nasdaq was up 0.4% to 6629. In a monster week for earnings, more than a third of the S&P 500 is due to report. While shares have opened this evening mixed.
Japanese indices opened higher this morning led by the victory of Japanese Prime Minister Abe in the snap elections and the weakness in the ‘Yen’, which hits 113.9 against the US Dollar. Shinzo Abe’s ruling coalition won a two-thirds majority in Japan’s snap election, paving the way for more ultra-easy monetary policy and flexible fiscal stimulus. His pledge to revise the pacifist constitution will help President Trump push his hard-line stance against North Korea. The Nikkei climbed 1.1% while the Chinese CSI rose 0.1% and the Indian Nifty rose 0.4%. However the the Korean Kospi was flat and the HK Hang Seng fell 0.6% while the Aussie ASX fell 0.2%.
Spain’s political schism is getting nasty. Catalan separatists are mobilizing a human shield to block efforts by Madrid to take control of the breakaway region — measures that could include taking over the local police force. Spanish stocks under performed the rest of Europe falling 0.6% while climbing in France (0.3%), Germany (0.1%) & Italy(0.1%). The Euro Stoxx 50 rose 0.1%.
The FTSE 100 was flat at 7524.5 and the FTSE 250 fell 0.1%.
Currency
The pound is at €1.1251 Euros and $1.3212 US Dollars.
Commodities
Oil prices were stable (WTI $51.87 & Brent $57.40) , holding on to last weeks gains, supported by supply concerns in the Middle East, namely Iraq and declining U.S. drilling activity, although analysts warned that the United States market may not be tightening by as much as expected.
Gold hit its lowest in over two weeks at $1280.6, as the dollar climbed to a three-month high versus the yen after Japan’s ruling bloc scored a big win in Sunday’s election, leaving the door open to ultra-loose monetary policy for longer.
Other News
Shareholders are on track to receive a record £94bn in dividend payouts from UK listed companies this year, according to a study. It comes after payouts leapt to £28.5bn in the three months to September, a record for a third quarter. The increase, which includes a rise in special dividends, was driven by bigger payouts from mining companies. The previous annual record, according to the report from Capita Asset Services, was £88.1bn, paid in 2014. Capita’s Dividend Monitor assessed data from firms listed on the London stock exchange’s main market, which has more than 1,500 companies, of which the biggest are on the FTSE 100. The third-quarter payout was 14% up on the period last year, with two-thirds of the jump due to bigger dividends from London-listed mining companies.
GKN is examining a radical break-up plan that could create two UK 100 companies — splitting its aerospace and automotive businesses. The industrial titan, which makes wing tips for Airbus and powertrains for car giants including Mercedes and Jaguar Land Rover, is in the early stages of considering the plan. A split has long been mooted by analysts but the promotion of two senior executives has accelerated thinking.GKN is examining a radical break-up plan that could create two UK 100 companies — splitting its aerospace and automotive businesses. The industrial titan, which makes wing tips for Airbus and powertrains for car giants including Mercedes and Jaguar Land Rover, is in the early stages of considering the plan. A split has long been mooted by analysts but the promotion of two senior executives has accelerated thinking.
Some of Britain’s top business leaders have called for a new model of capitalism, stating that management greed, corporate tax dodging and investor short-termism had led it astray. Sir Win Bischoff was among members of the FT City Network who echoed concerns over short-termism.
Five of Britain’s biggest business lobby groups have called on the government to agree a transition deal with the EU as soon as possible and for it to match current trading arrangements as closely as possible. In a letter to David Davis, the CBI and British Chambers of Commerce, the Institute of Directors, the manufacturers’ group EEF and the Federation of Small Businesses, said such an arrangement “would provide the greatest economic continuity and could be agreed quickly, ensuring discussions could move swiftly on to our long-term future relationship with the EU.” An agreement “is needed as soon as possible, as companies are preparing to make serious decisions at the start of 2018, which will have consequences for jobs and investment in the UK,” the letter said.
Research shows that UK-listed businesses issued 75 profit warnings in the three months to the end of September, up from 45 in the second quarter, driven by a sluggish domestic economy. The increase represents the biggest quarterly rise in nearly six years and comes as official figures are expected to this week show growth of just 0.3% in the third quarter. Retail, support services and travel companies fared worse than exporters and multinationals. Summer brought more mixed fortunes for UK plc, with the contrast between accelerating overseas markets and the slowing UK economy increasing. Many businesses besieged by pricing pressures before Brexit are also now feeling the brunt of rising domestic uncertainty and rising costs.
More than 56,000 small businesses in England will face business rate increases totaling £152m in April, according to research by rates specialist CVS. The firm says 37,364 small shops will see their business rates bills rise above inflation next April, with 30,198 small shops facing rises in their rates bills of between 10% and 14.99%. Following a fall in retail sales, Helen Dickinson, chief executive of British Retail Consortium, says this “may be the last straw” for many shops. “Across the country, especially in economically deprived and vulnerable communities, the cost of failing to take action will likely be seen in yet more empty shops and gap-toothed High Streets,” she added.
A report from investment bank UBS suggests British workers can expect among the worst pensions in the developed world. The bank found that a 50-year-old female in Sydney, Australia today can expect to retire at age 67 with an income of 72% of her current salary, compared with 41% in London. The figure puts Britain just one place above the lowest-ranked city, Taipei in Taiwan. UBS calculated how much a country’s basic state pension, plus mandated pensions would pay out as a proportion of the income of a 50-year-old “average Jane” living in the capital city. Singapore (73%), Sydney, Paris (69%) and Milan (67%) topped the table.
Britain saw its smallest budget deficit for any September in the last 10 years, according to ONS figures. Last month’s deficit stood at £5.902bn, down almost 11% compared with the same month last year, and well below the £6.5bn forecast by economists. The deficit for August was also revised down by about £1bn to £4.716bn.
Both the British Chambers of Commerce and the British Retail Consortium have urged Philip Hammond to postpone the annual uprating of business rates for the next two years to stimulate investment and raise productivity. Freezing business rates is just one proposal the BCC said could be funded by postponing planned cuts to corporation tax from 19% to 17% by 2020 until after Brexit. A special “Brexit Investment Allowance” should be introduced, the BCC said, to boost investment while the government negotiates the UK’s exit from the EU. The BRC said failure to freeze rates will add £270m to retailers’ bills.
The number of breweries has broken through the 2,000 barrier for the first time since the 1930s following a 64% increase over the past five years. The craft beer boom has reversed 70 years of consolidation in the industry. The increase has in large part been driven by micro-breweries, which have benefited from a 2002 tax break as well as investment by large brewers. The craft brewers can’t afford to rest on their laurels they will need to work hard to get their product into that limited shelf space and bar space.
Nobel prize-winners Joseph Stiglitz and Michael Spence are to lead a new commission examining the challenges facing the global economy. The Commission on Global Economic Transformation will report in 2019 on its findings in areas including migration, climate change, robotics and the rise in populist politics. Commenting on the launch, Spence said: “The economics profession is on a long list of things that people don’t trust. We were sometimes overzealous about defending globalisation. We want to listen to the people who don’t trust the elites.”
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