March 8, 2016

Pegler’s market report – 08.03.16

As published in the Brighton Argus (08.03.16) Business on page 21 under the title Pegler’s Market Report:

Mining shares help the market stage a recovery

There are signs the tide is turning in the fortunes of industrial metals. As well as copper, nickel and zinc made gains over last week as investors became hopeful of fresh Chinese stimulus that could give the sector a much-needed boost.

Gains in mining stocks were primarily responsible for most major stock markets movements that have staged a recovery from recent lows. That has not stopped money pouring into gold, driving the price of bullion up to a 13-month high.

The US economy created 242,000 new jobs last month – a better performance than expected, although little pick up in wage growth.

Britain’s car industry has posted its strongest February sales growth in 12 years, despite another drop in demand for Volkswagen cars.

Admiral provided some good cheer, after the car insurer unveiled record pre-tax profits and said revenue tipped the £2bn mark for the first time. Despite reporting a fall in profits at its Confused.com brand, Admiral’s investors were heartened to hear the firm’s global operations are performing stronger than expected, and that it would lift its dividend.

Leisure giant Whitbread’s shares struggled after weaker-than-expected comparable sales at its Premier Inn and Costa chains left a bitter taste among investors. Costa has suffered its weakest growth since the final quarter of 2009.

It’s a bleak time for workers at troubled UK high street chain BHS. The company’s owners are planning to cut 350 jobs, and is also threatening to close half its stores unless landlords cut the rent.

Supermarket WM Morrison will regain its place in the FTSE 100, after the grocer was ejected at the end of last year. Paddy Power Betfair, publisher Informa, and hospital operator Mediclinic International will also be promoted. The changes take effect at the close of business on March 18. Meanwhile, Hikma Pharmaceuticals, Sports Direct, Smiths Group and Aberdeen Asset Management will be demoted to the FTSE 250.

Housebuilding shares are subsiding after a mixed picture from the latest surveys of property prices. Halifax said the average price of a house fell 1.4% over the month in February, while Nationwide said they edged up just 0.3%. Overall, prices are expected to continue rising over the year, but the forthcoming EU referendum could weigh on the market.

By David Pegler, Brighton Capital Management