Trade hope
Global stocks and the price of Brent Crude rallied on the prospect of a more permanent US-China trade deal, as talks between the country’s delegations were extended to a third day. Oil rose above $59 a barrel for the first time in three weeks, with Hong Kong stocks the best performers in Asia, hitting a four-week high on the third day of talks. Hopes were lifted after President Trump tweeted: “Talks with China are going very well!”, while slowing global growth has also put pressure on both sides to reach an agreement.
Dunelm rebounds
Worldstores on track
Dunelm's (DNLM) shares recovered all the ground lost during the past 12 months, following a better-than-expected second-quarter trading update. The homewares retailer reported a 5.7 per cent improvement in like-for-like sales across stores, while online revenues soared by 37.9 per cent over the same period. Gross margins are also expanding now that the group has eliminated lower-margin sales from its Worldstores acquisition, and as foreign exchange rates have become more favourable. The group has also been working hard to improve its sourcing techniques.
Rolls under microscope
SFO narrows probe
The Serious Fraud Office (SFO) has removed an unspecified number of individuals from its probe into corrupt activity at Rolls-Royce (RR). In January 2017, the manufacturer agreed a £671m deferred prosecution arrangement with the SFO in relation to bribery and corruption in some of its overseas activities. This week, a spokesperson for the SFO said: “Some individuals were notified that they are no longer suspects in the Rolls-Royce investigation. The investigation continues in relation to a number of individuals.” The SFO announced it was formally investigating Rolls-Royce in December 2013, over charges including falsifying accounts to hide the illegal use of local middlemen.
Samsung disappoints
Smartphone sales weak
Apple (US:AAPL) was not the only tech giant to warn that slowing economic growth in China would dent its performance this year. Samsung forecast a drop in operating profits of more than a quarter for the final three months of last year – the first quarterly contraction in two years. The South Korean group said demand for chips and smartphones had weakened, blaming the ongoing trade tensions between the US and China and weaker growth in the latter’s economy. Smartphone sales were flat during the period, while reduced investment in data centres by global big tech companies had cut prices for Samsung’s memory chip business, management said.
Risers and fallers (%)
| LOW & BONAR | +78.57 |
| DUNELM GROUP | +27.08 |
| KIER GROUP | +25 |
| CLARKSON | +23.16 |
| CMC MARKETS | +21.67 |
| CONSORT MEDICAL | -10.86 |
| RAVEN PROPERTY GROUP LIMITED | -8.22 |
| OXFORD BIOMEDICA | -8.2 |
| TRIFAST | -6.91 |
| HIKMA PHARMACEUTICALS | -6.79 |
Week to 8 January 2019
Steel pushed lower
Tariffs frustrated
US steel prices dropped to pre-US tariff levels, as concerns over a further reduction in Chinese demand mounted. S&P Global Platts benchmark price for hot-rolled steel coil fell to around $725 a short tonne during the first week of January, down from a peak of $920 in July last year. That is despite a global tariff of 25 per cent being imposed on US steel imports in May. The Chinese benchmark steel price has also fallen by more than a fifth since July, reflecting weaker economic growth forecasts for the country this year.
Productivity slumps
Inflationary pressure rises
UK labour productivity growth was at its lowest in two years during the third quarter of 2018, according to the latest data from the Office for National Statistics. Output per hour worked was 0.2 per cent higher than the same period the prior year, which mean real labour costs – an indicator of inflationary pressure – rose by an annual 2.8 per cent. Sluggish productivity growth was despite stronger output as better weather increased consumer spending.
Ted escapes contagion
Shares rally
Allegations of misconduct against Ted Baker (TED) founder and chief executive, Ray Kelvin, at the end of last year did not hurt festive trading at the clothing chain. Retail sales rose by 12.2 per cent over the five weeks ended 5 January 2019, with ecommerce sales registering an 18.7 per cent improvement. Online sales now represent more than a quarter of total retail sales. Gross margins also held up despite the promotional backdrop, so full-year results are expected to report in line with expectations.
