December 6, 2016

Pegler’s market report – 06.12.16: Europe now back in the spotlight

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (06.12.16) Business under the title Pegler’s Market Report:

Europe now back in the spotlight

Italy’s constitutional referendum that took place on Sunday plus general nervousness surrounding other European markets clearly placed the spotlight back on the region and likely political uncertainty over the coming months.

US employers boosted hiring in November and the unemployment rate dropped to a more than nine-year low of 4.6pc. Despite the mixed jobs report, most commentators now believe the Fed is likely to hike US rates in December. Apparently, markets have now priced in a total of four and a half hikes before year-end 2018 compared with two before the election.

Away from the US jobs report, easyJet’s dividend has been targeted by analysts as one at risk. There is concern that fierce competition will keep airfares low over 2017. EasyJet may need to face up to the downturn in the sector either by lowering its dividends or revising its spending plans for its fleet.

Elsewhere, Crawley-based security giant G4S has agreed the sale of its Israeli business to a local private equity firm for £88m. The sale is part of a wider strategy to offload less profitable parts of the business including the Israeli division, its UK utilities business, and contracts to run youth justice facilities at Medway in Kent and Oakhill near Milton Keynes. In total these deals are expected to raise between £250m and £350m.

Shares in Berkeley jumped after it said it had amended its dividend plan after being hit hard by Brexit uncertainty and an “extraordinary attack” on buy-to-let stamp duty. The housebuilder announced it was changing its five-year dividend plan to return some cash through share buybacks instead.

Britain’s biggest building supplies company Travis Perkins has become the second Brexit relegation victim after it was demoted from the UK index of leading 100 shares. Berkeley Group went back during the last revamp in September.

Precious metals producer Polymetal International was also given the boot from the blue-chip index after gold recorded its worst monthly performance since June 2013. In November, gold fell by almost 8pc as investors ditched safe-haven assets in hope’s US president-elect Donald Trump’s spending plans will boost markets.

Oil moved in the opposite direction after the Opec cartel agreed to cut production for the first time since 2008 in an attempt to address the global supply glut and lift prices.

Britain’s vote to leave the European Union has had no effect on the majority of shoppers Christmas spending plans, according to fresh figures. The average UK adult expects to spend £280 on Christmas gifts this year, according to a survey by PwC of 2,000 shoppers across the country. Apparently, Scotland has the highest expected festive spend with £328.66 while the East Midlands has the lowest at £241.47.

By David Pegler, Brighton Capital Management