March 6, 2018

Pegler’s market report – 06.03.18: New US tariffs spook the market

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (06.03.18) Business section under the title Pegler’s Market Report:

New US tariffs spook the market

With markets already under pressure after hawkish comments from new Federal Reserve chair Jay Powell, fears of a possible trade war didn’t help matters. News that President Trump would impose new US tariffs on imports of steel and aluminium made investors think there will be likely retaliation from the EU and China.

The US President delivered on one of his flagship “America First” pledges by placing a 25pc tariff on steel imports and 10pc on aluminium arriving in the US to protect domestic industry.

As with most trade wars, there is always a good bout of tit for tat. Mr Trump has a week to reconsider his decision before it comes into force. It does feel a little odd – just as he is about to invest heavily into infrastructure, building new bridges, which are typically made of steel. What if he can’t find a US supplier to source it all? He will suddenly have to go shopping elsewhere.

UK consumer confidence was down in February, according to GfK’s index of household sentiment. Respondents were less optimistic about the economy and said they were less willing to spend. GfK said that consumer confidence will remain subdued until Britons felt a positive impact on their inflation-squeezed finances. Even so, borrowing on credit cards jumped £746m in January – its largest increase since 2005 – according to Bank of England data.

The housing market still looks to be struggling, with fewer buyers looking for homes, fewer homes coming on to the market, and the prospect of rising mortgage rates.

Bank of England Governor Mark Carney believes Bitcoin is failing as a usable form of money and has described crashing cryptocurrencies as having “the classic hallmarks of bubbles”. The Governor called for digital currencies to be regulated like the rest of the financial system but stopped short of hinting at a ban in a recent speech. Bitcoin’s price has plunged from its record high of nearly $20,000 as authorities in China, South Korea, India and Russia step up plans to clamp down on cryptocurrencies.

Shares in Mothercare plunged to a fresh low, after the collapses of fellow high street strugglers Toys R Us and Maplin spooked investors. The retailer’s share price has declined 78pc in less than a year as it buckles under the weight of the tough retail environment and a botched discounting strategy over the festive period. Dixons Carphone nudged up a little on hopes that it can snap up some of Maplin’s market share. Greggs shares were looking a little flaky after City analysts warned that costs from rising wages will hit the bakery chain.

Speculation is mounting that Sports Direct is close to a bid for Debenhams after the Mike Ashley-backed sportswear giant upped its stake in the embattled department store to 27.6pc.

By David Pegler, Brighton Capital Management