April 3, 2018

Pegler’s market report – 03.04.18: Technology stocks have a tough time

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (03.04.18) Business section under the title Pegler’s Market Report:

Technology stocks have a tough time

Technology shares, which helped power the rise of the US stock market last year, are pulling it lower now. The tech-rich Nasdaq index continued a multi-week sell-off spurred by calls for tighter regulation of tech firms, competition concerns and questions over autonomous driving.

Tesla’s share price plunge extended after questions were raised following a fatal accident in one of its semi-autonomous Model X cars, while Amazon nosedived as much amid reports that Donald Trump could target the e-commerce firm to help smaller retailers in the US.

Conversely Facebook shares recovered a bit of ground. The social media firm’s stock has fallen by almost 20% in recent weeks, following allegations that leaked user data was exploited for political purposes.

In another reversal of fortunes, shares of traditional retailers, such as Macy’s and Walmart, which were hammered by doubts last year – were among the week’s winners.

Back on home soil, GlaxoSmithKline (GSK) has agreed to buyout Novartis’s 36.5% stake in their consumer healthcare joint venture for $13bn in cash, leaving GSK in full control of the business. The joint venture, formed in 2015, sells products such as Panadol headache tables and Sensodyne toothpaste. Single ownership will allow GSK to rationalise the portfolio, and it is considering divesting its Horlicks malted drinks business and other consumer healthcare nutrition products to help fund the Novartis transaction. GSK still has some operations in Worthing although there were some heavy redundancies last year as part of a larger restructuring plan.

UK Finance said the amount outstanding on credit cards increased by 6.3% from February last year – the largest rise in 10 months. This outweighed a decline in the amounts outstanding on personal loans and overdrafts.

Howard Archer, chief economic adviser to the Ernst & Young Item Club, said: “Despite February’s modest rise in unsecured consumer credit growth, the impression remains that consumers have recently become more cautious in their borrowing while lenders have become warier about advancing unsecured credit.”

Nevertheless, the Bank of England is concerned that risky mortgages are making a comeback. Lenders are doing greater amounts of high-loan-to-value lending, according to the board minutes of the latest Financial Policy Committee meeting. If this continues, the committee said it would consider ordering lenders to raise their financial reserves.

Later in the week we will hear about UK Car Registrations – new registrations decreased 2.8% year-on-year to 80,805 in February, the eleventh consecutive month of decline, as demand for diesel vehicles dropped 23.5% to 28,317 units. Demand for petrol cars rose 14.4 percent to 48,941 units.

On Friday we will get data on US unemployment – the publication of strong US employment figures has resulted in some stock market volatility since the start of the year, amid speculation it could push interest rates up faster and further than expected. The US unemployment rate stood at 4.1% in February 2018, unchanged from the previous month’s 17-year low.

By David Pegler, Brighton Capital Management