It is amazing what a little hope and political duct tape can do. After a very challenging December, markets have staged a remarkable turnaround, with the S&P and Dow both up by more than 7% this month – the biggest gains since January 1987 and 1989 respectively. This follows a positive earnings season in the US which has provided welcome relief for investors. The US and China have claimed progress in further trade negotiations, with President Trump suggesting a meeting with Xi directly will conclude in a ‘very big deal’ … sound familiar? Meanwhile, the Fed left rates unchanged and Mr Powell gave his most dovish message yet suggesting future rate falls are just as likely as rate hikes, citing a number of geo-political concerns, and the government shutdown temporarily resolved.
Closer to home, there were a number of Brexit votes in Parliament on Tuesday. For once there was a degree of unity from the Conservative party, in pulling together a majority around an amendment calling on Theresa May to reopen the negotiations with the E.U and replace the Irish border backstop with ‘alternative arrangements’. This is all well and good, but the message from Brussels, and EU leaders, was resolute in stating that they were not prepared to reopen negotiations. It seems that Theresa May has put party before country, with cross-party talks a non-starter.
The dominance of the ‘Big Four’ UK accounting firms is an area that has continually come under fire, however, comments from David Dunckley, CEO of smaller rival Grant Thornton, following the collapse of Patisserie Valerie has brought renewed focus onto the industry. His comments, in front of a parliamentary committee, suggested that auditors are not meant to detect fraud! MPs quite rightly reacted angrily to this inference and does not inspire trust in the industry.
Markets in a minute
- The FTSE 100 is up 3.1% this week.
- The 10 year Gilt yield has fallen to 1.22%.
- The Chinese slowdown has affected a number of companies; NVIDIA (-14%) cut their Q4 revenue forecast two weeks before their scheduled earnings release and Caterpillar fell 9% as investors were bugged by results.
- Diageo shares were up 4% with t-total sales better than expected.
- In contrast, Unilever sales missed expectations and shares fell 2.5%.
- Facebook shares got a leg-up, with shares rallying 11%, following a major beat.
- Royal Dutch Shell was up 4% on Wednesday, fuelled by a positive beat in downstream.
Quote of the week
The UK has been feeling the cold of late, but spare a thought for residents of Iowa, where temperatures are expected to fall to -53C. The advice from the National Weather Service…..
“Avoid taking deep breathes and minimise talking”.
Dry January is over so have a great weekend!