WEEKLY MARKET ROUND-UP – 22/01/19

by | Jan 22, 2019 | Market updates

WEEK ENDING 18 JANUARY 2019

Gaming is eating up the competition

Video games now account for more than half of the UK’s £6.8bn a year home entertainment market overpowering both the video and music markets combined.

Gold continues to shine

Newmont Mining is to acquire fellow gold miner Goldcorp in an all stock deal valued at $10bn.

It is the second big gold merger in the last three months, following Barrick Gold’s purchase of Randgold for $6bn.

However, this deal has been less well received than the former with Newmont’s share price dropping almost 9% on Monday on the back of the news.

The announcement of the deal, which it said would lead to increased gold production, followed a cut in production guidance from Newmont. The company attributed the cut to it having reduced the lifespan of one of its mines in Nevada and suspended another after a wall slide resulting in a loss of 120 jobs.

Gambling stocks take a hit as US tightens regulations

The US Department of Justice has called for wider restrictions on all online gambling in a blow to betting and gambling firms.

Many UK names, such as William Hill, Paddy Power and Betfair, have been looking to expand in the US due to tighter regulations in the UK, and so saw their share prices fall on the news.

On Monday it was revealed the DoJ had appeared to reverse its 2011 opinion that had made only sports betting online illegal under the Wire Act.

It now suggests that the interpretation of the law that makes certain types of betting illegal should be considered alongside the Unlawful Internet Gambling Enforcement Act.

US high-yield market braced for ‘famine and feast’

Last Friday marked 41 days since a US high-yield company had the confidence to offer bond markets a new issue making it the longest ‘drought’ in the US high-yield market for nearly 24 years.

As Quilter Investors assistant portfolio manager Tim Li explains, “An energy business called Targa Resources eventually ended the dry spell, raising $1.5bn in a re-financing. Despite being higher quality it still needed a hefty issuance premium. This raises questions as to what more leveraged issuers will need to dangle in front of investors.

“Market volatility has put the cat among the pigeons,” he says “so potential issuers are now in holding patterns hoping the clouds will part long enough for them to get their issues away in 2019.”

Brexit: The week that was….

In the largest government defeat since 1924, Prime Minister Theresa May’s Brexit deal was overwhelmingly rejected by MPs by 432 to 202 earlier this week.

Almost immediately the opposition Labour Party called for a motion of no confidence in the government, which was narrowly defeated (325 to 306) thanks to the support of the prime minister’s “confidence and supply” partners the Democratic Unionist Party (DUP).

PG&E under fire

US utility firm PG&E, which is under investigation as the source of the devastating California wildfire at the end of 2018, saw its share price fall more than 50% on Monday after it looks set to file for bankruptcy.

As it grapples with potential liabilities of $30bn, it said it would file for Chapter 11 insolvency protection by the end of the month, which would make it the largest utility bankruptcy in US history.

The firm, which is seeking a replacement chief executive, has seen two-thirds of its market value wiped out since November, and its debt downgraded to junk status.

…Targa Resources eventually ended the dry spell, raising $1.5bn in a re-financing. Despite being higher quality it still needed a hefty issuance premium. This raises questions as to what more leveraged issuers will need to dangle in front of investors.

Tim Li, portfolio manager, Quilter Investors

Chart of the week

Chips and dips: On Thursday of this week, Taiwan Semiconductor (TSMC) forecast its biggest quarterly revenue drop in a decade causing share prices in the sector to recoil once more. However, global sales of semiconductors have soared 80% or so in the last three years alone.

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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