WEEKLY MARKET ROUND-UP – 05/02/19

by | Feb 5, 2019 | Market updates

WEEK ENDING 1 FEBRUARY 2019

UK inflation comes into land

UK CPI inflation fell to 2.1% in December 2018, its lowest level in two years. It’s now within touching distance of the Bank of England’s 2% target, helped by plunging oil and petrol prices and cut-throat pricing from the UK’s air operators.

Source: Quilter Investors/ONS.

Vale of tears

The world’s largest iron ore producer, Brazil’s Vale, plummeted almost 25% on Monday following news that another of its mining dams burst on Friday killing at least 65 and leaving little hope for the remaining 300 people still missing in the ruined town of Brumadinho in the state of Minas Gerais.

In late 2015, a similar ‘tailings’ dam of Vale’s collapsed in Mariana just a few miles down the road. The incident killed 19 and ravaged the local countryside with toxic mining spill in what was then seen as Brazil’s worst environmental disaster.

Local authorities have already arrested three employees and others on suspicion of murder, falsifying documents and environmental crimes with more senior arrests expected to follow.

Facebook to combine messaging apps

Social media giant Facebook plans to integrate the messaging services across its platforms WhatsApp, Instagram and Facebook by the end of 2019 or early 2020.

The move would see the three apps remain as stand-alone propositions but the underlying technology would be unified so customers could send messages across platforms, with end-to- end encryption extended across all three.

The change could be seen as a way to keep users engaged and possibly increase advertising revenue after two years of painful scrutiny and scandal. But it’s also raised data privacy concerns on how user data would be shared across the platforms, with both EU and US officials questioning the move.

Caterpillar curls up

Shares in Caterpillar, the world’s largest construction equipment maker and a bellwether for global industrial stocks, saw its shares bomb more than 9% on Monday as it announced its biggest earnings miss in a decade.

As Maz Alamouti, head of dealing at Quilter Investors, explains, “Disappointing guidance in the third quarter wiped 7.5% off the shares; they fell more than 9% this week due to falling Chinese sales, trade tariffs, rising costs and currency losses.

“But the news isn’t as bad as the bears would have us believe; a good part of the EPS miss comes from a change in accounting practices to include restructuring costs – something that’s part and parcel of being a cyclical manufacturer.”

Credit: Stocked House Studio/Shutterstock.

US prepares to slap the cuffs on Huawei’s Meng

After arresting Meng Wanzhou, CFO of China’s Huawei (and daughter of its feted billionaire founder Ren Zhengfei) on 1 December in Vancouver, the US Justice Department this week formally filed to extradite Meng to face a host of criminal charges. It also filed separate charges against Huawei for industrial espionage against the US phone giant T-Mobile.

The Eastern District of New York alleges Meng, Huawei and Skycom, a Hong Kong subsidiary, committed wire fraud, obstructed justice, laundered money and violated the International Emergency Economic Powers Act (IEEPA) by doing business with sanctioned Iran.

With Chinese officials decrying the charges as “unfair and immoral”, the latest round of Sino/ US trade talks isn’t off to a great start.

Not just online delivery…

The share price of both Marks & Spencer and Ocado jumped on Monday following reports the two were in talks regarding the launch of an M&S food delivery service.

The online grocery market was worth £11.4bn in 2018 and could hit £17.3bn by 2023, but while M&S has an online presence, mainly for clothes, it doesn’t offer a full food delivery service. Meanwhile, Ocado currently has a supply and delivery contract with Waitrose, which runs until 2020. Reports suggest M&S is now in talks to replace Waitrose when the contract ends.

Shares in M&S climbed almost 3% and Ocado, the top performing UK share in 2018, gained more than 6% on the news.

Disappointing guidance in the third quarter wiped 7.5% off the [Caterpillar] shares; they fell more than 9% this week due to falling Chinese sales, trade tariffs, rising costs and currency losses…

Maz Alamouti, head of dealing, Quilter Investors

Chart of the week

Economic growth dims: The IMF downgraded its outlook for global growth in its latest update, but with the US government shutdown, global trade uncertainties and European car woes still to be factored in, this could just be the start of a downward trend.

Source: IMF – World Economic Outlook Update January 2019

If any article in this market update has an effect on your finances and you would like professional advice, then please get in touch.

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