Hinweis: Dieser Beitrag ist auch auf Aberdeens "Thinking aloud"-Plattform verfügbar.
New best friends Donald Trump and Kim Jong-un met up in Hanoi, Vietnam this week. Ahead of the playdate, Donald Trump announced ‘significant’ progress in negotiations on trade with the Chinese and that the US would delay the increase in tariffs on imports. He also announced a summit with the Chinese president, Xi Jinping, to conclude an agreement. As a result, the Chinese equity market had its best day in three years and the cheer quickly spread to other global markets.
The fun didn’t last long though as the US rejected North Korea’s request to lift all sanctions and walked away from the talks. From one nuclear related theme to another; India and Pakistan exchanged airstrikes, which also hit risk assets – cooler heads are prevailing for now.
In Europe, the Brexit saga continued, or should that be Game of Thrones with the UK parliament fragmenting into many competing factions. But, whisper it, there may be progress. While Theresa May kicked the can down the road, again – you have to start feeling for it, the battering it’s taken – she was forced into a retreat on her no-deal strategy and acknowledged Brexit may have to be delayed. She put into place a framework in which the no-deal option can be taken off the table. Further pressure was applied by the Labour party when it confirmed that it would now support a second referendum.
Currency traders approved and sterling rose to over $1.33 – a level not seen since the summer of 2018. However, the next ‘meaningful’ vote has been delayed for another two weeks. Que sera sera… for now!
M&Ania
Merger Monday helped boost investors’ mood at the start of the week. The companies involved were wide ranging, from mining (Newmont/Barrick Gold) through pharmaceutical (GE selling its life science unit) to pet hospitals. The earnings seasons blackout period is over and boardrooms more confident, notwithstanding nervousness in financial press; boards and ourselves expect money to remain cheap and are taking advantage of it.
Hopes that the US and China can agree a deal on trade have bolstered the industrials and materials sectors this month, while energy has been buoyed by firmer oil prices. The S&P 500 is in line for its best start to the year since 1987 and is around 5% off its record high set in September.
Eat all you can…
The US retail industry has been in the spotlight, with JC Penney announcing an annual loss, with Macy’s and Home Depot giving a weak outlook for sales.
Such gloomy news has resulted in the sector becoming the most shorted corner of the market. The easiest of easy calls some will say. Yet, the shorters, the hedge funds, have made a net loss on their positions. How come? Well, the assumption was physical retail was dead. In fact, the industry has polarised into winners and losers, rather than just losers – the assumption of the hedgers. Shares in Best Buy surged 17% this week after the electronics retailer beat expectations for fourth quarter profits. According to recent data from financial analytics company S3 Partners, hedge funds have made particularly big losses by betting against the likes of retailers Target and Kohls.
Three little pigs… the house left standing.
In the UK market, bricks and mortar was the place to be. Housebuilders have had a good week with little wind to blow them down. Top of the pile was Persimmon. Its profits topped £1bn for the first time; it was aided by the government’s Help-to-Buy scheme that assists first-time buyers. Other builders to do well for the same reason were Taylor Wimpey and Bovis, who reported healthy results. However, house price growth in the UK was reported as subdued. We prefer volume related stocks such as Bellway and Redrow.
Meanwhile, Marks and Spencer surprised investors when it announced it was in talks with Ocado about food delivery. To cover the cost of moving into online grocery it launched a rights issue and cut its dividend – not well received. The share price was marked down, however, the bond market was very receptive as yields on the company’s bonds fell as well. Another rights issue not going well is Metro Bank. Its struggles continue to rebuild its balance sheet after mislabelling assets. Its shares have lost a third of their value.
So after a promising start to the week the FTSE 100 index was down 1.3% by the close on Thursday. The S&P 500 index was also lower, falling 0.2%. It all looked so promising on Monday. European markets bucked the negative trend though; the FTSE Europe ex-UK index finished 0.5% higher.
