Shaky ground
BHP rating cut
The commodity crunch has continued kicking its victims while they're down. The latest company to suffer another bruise is miner BHP Billiton, which has had its credit rating downgraded by Standard & Poor's to 'A' from 'A+' as well as being placed on 'credit watch with negative implications'. The ratings agency cited "lowered price assumptions" for iron ore, oil and copper and thus expected BHP's ratio of funds from operations to debt to fall to 30-40 per cent, "well below our threshold for an 'A+' rating". The rating could be cut again on the back of BHP's earnings release in February.
Major stumbles
BP feels bite
Even taking into account the harsh conditions in the oil sector, a fall of more than 8 per cent on the back of BP's results was a big move for the shares. The company reported its worst annual loss for more than 20 years, compounded by the fact it has set aside another $443m (£308m) for liabilities related to the 2010 Deepwater Horizon disaster. The total bill has now hit $55bn. Management also announced a further 3,000 job cuts, a growing trend across the industry as the low oil price takes its toll on producers. See page 59 for more on BP.
Regulator wrath
CFD scrutiny
Companies offering contracts for difference (CFD) derivative instruments have come under increased scrutiny by the financial regulator. The FCA said it thinks "firms may not have processes that allow them to assess the appropriateness of CFD trading for prospective clients" and to prevent financial crime. This comes after Plus500 last year revealed it had temporarily frozen thousands of UK accounts in order to comply with money laundering regulations. Megan Butler, the regulator's executive director of supervision, added risk warnings in the industry were generally not adequate.
Countryside stake
Housebuilder to list
A market cap of roughly £1.12bn is expected to be achieved for housebuilder Countryside Properties, which announced its initial public offering last month. The shares are priced between 225p and 275p and following completion on or around February 12, the company expects to have a free float of between 30 per cent and 50 per cent of its issued share capital. Of the £114m set to be raised, £64m will be used to pay off debt. Chief executive Ian Sutcliffe said the company would target 3,600 completions a year. Retail investors can take part in the IPO through intermediaries.
Tracking uncovered
Watchdog growls
Up to 15 per cent of retail equity funds across Europe could "potentially be closet indexers", according to the European Securities and Markets Authority (Esma) watchdog. The body analysed 2,600 funds across Europe between 2012-2014 and found nearly a sixth may have engaged in 'closet tracking' - whereby supposedly active stockpicking managers virtually track the index they're meant to outperform. Active funds charge a significant premium compared to products designed to track an index and so could have been mis-sold, Esma said, adding the issue warranted a "closer look".
Diverging fortunes
Economic imbalance
The UK's uneven economy isn't rebalancing yet, recent data suggests. The purchasing managers' index (PMI) which follows the hugely dominant services sector crept up to 55.6 in January from 55.5 in December. Economists had expected a dip to 55.4. A reading above 50 indicates growth. Fears about the UK's exit from the EU and China's growth rate could weigh on the numbers later this year though, survey compilers Markit said. Meanwhile, the UK construction sector's pace of expansion hit a nine-month low with a PMI of 55 in January from 57.8 in December.
Chart of the Week
When equity markets are falling it’s interesting to see what multi-asset fund managers are doing. The recent malaise in markets has prompted action from the world’s central banks in the form of predictable rhetoric from the European Central Bank’s president Mario Draghi and a surprise move from his counterpart in Japan, Haruhiko Kuroda. But what should investors do?
Trevor Greetham, head of multi-asset at Royal London Asset Management, has created his own sentiment indicator, which combines signals from the market with investor and company director buying appetite to measure investor sentiment. “A negative reading indicates depressed sentiment and we view readings below -1 as a signal to buy shares,” he said. This means the current reading of -1.4 is particularly appealing.
