May's defeat
Prime Minister Theresa May was left licking her wounds on Tuesday night after an historic defeat of her Brexit withdrawal deal. MPs voted 432 votes to 202 to shoot down the deal, which is the worst margin of defeat for a British government in modern history. The pound reacted gleefully. A fall of over 1 per cent across Tuesday had brought it as low as $1.27. It rallied to $1.29 following the result, in an indication that markets expect a range of outcomes that includes more time for negotiations, a softer Brexit, or no Brexit at all.
German slowdown
Car sales weaker
German economic growth slowed to its lowest level in five years during 2018, as a weaker global economy and lower car sales took their toll. Europe’s largest economy expanded by 1.5 per cent last year, according to figures from the Federal Statistics Office, compared with 2.2 per cent in 2017 and behind initial estimates of 1.8 per cent for the year. German consumers were more hesitant to buy new cars amid the ongoing emissions scandals surrounding some of the country's motor manufacturers.
US at impasse
Shutdown continues
The US government shutdown rolled on, with White House economists warning that lost output from workers staying home without pay could wipe 0.13 percentage points from growth each week it continues. The country’s second-biggest airline, Delta, said the shutdown could weigh on earnings during the current quarter, while Citigroup chief financial officer John Gerspach warned that the impasse could trigger a slowdown in IPOs and affect consumer spending patterns. President Trump has refused to approve the budget unless it includes $5.7bn for a wall along the Mexican border, which the Democrats have rejected, making this the longest shutdown in history.
Bovis beats
Margins step up
It’s not all doom and gloom for UK housebuilders. Shares in Bovis (BVS) were up 5 per cent on the day management reported that profits for 2018 would be at a record and slightly ahead of market consensus. Total completions came in at 3,759 units, a 3 per cent increase on the prior year, while the underlying selling price also rose to £338,000 from £334,500. Operational efficiencies implemented over the past 18 months also mean the group expects a “significant step up” in operating margin.
Opec over barrel
US output to soar
The challenge faced by the Organization of the Petroleum Exporting Countries (Opec) and its partners in stabilising oil markets may soon get tougher. The Energy Information Administration (EIA) has predicted that the US will become a net petroleum exporter by September 2020, shipping more than 1m barrels a day by December that year. US crude oil production is forecast to rise to an average 12m barrels a day in 2019 and 12.9m in 2020 by the EIA. In late November 2018 the US announced it had fleetingly become a net oil exporter for the first time in decades.
Risers and fallers (%)
| GULF MARINE SERVICES | +38.78 |
| TED BAKER | +18.01 |
| SPIRENT COMMUNICATIONS | +16.89 |
| NANOCO GROUP | +15 |
| SOFTCAT | +14.43 |
| DEBENHAMS | -42.25 |
| LOW & BONAR | -24.8 |
| THE GYM GROUP | -20.04 |
| PROVIDENT FINANCIAL | -19.02 |
| HALFORDS GROUP | -16.04 |
Week to 15 January 2019
Persimmon relief
Completions solid
The salary paid to former chief executive Jeff Fairburn may have weighed on Persimmon’s (PSN) share price during the past 12 months, but the housebuilder finally had some good news for investors this week. It expects to deliver full-year results slightly ahead of expectations for the year to December 2018. Legal completions grew by 3 per cent, while average selling prices were up 1 per cent at £215,560. Demand remained strong, especially as selling prices are at the lower end of the scale. And while input cost inflation remains, the housebuilder has developed its own manufacturing facilities to make bricks, roof tiles and frames.
Rev's woes continue
Costs creep up
Shares in Revolution Bars (RBG) fell nearly a fifth on the day the bar operator announced that it expected adjusted cash profits for the first half to be £2m lower than last year due to a decline in like-for-like sales and increased operating costs. Adjusted cash profits for the full year will likely come in at around £12m, down from £15m in the previous year. Sales during the four weeks to New Year’s Eve were up 2.6 per cent, but down 4 per cent over the 26 weeks to 29 December.
