October 9, 2018

Pegler’s market report – 09.10.18: Onwards and upwards for the US – an unbalanced global dynamic

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (09.10.18) Business section under the title Pegler’s Market Report:

Onwards and upwards for the US – an unbalanced global dynamic

Further US data has shown the world’s biggest economy continues to grow strongly. Consumer confidence, a health check on the service sector and private-sector jobs growth have all pointed to continued solid expansion. There definitely looks like there is an unbalanced global dynamic, in that the US is booming, while most of the rest of the world slows or even stagnates.

A Federal Reserve that is raising rates to prevent the US economy from overheating is constraining the policy options of countries where financial conditions are tightening and trade tensions intensifying. Investors now see an 80pc chance of a Fed hike in December and have revised upwards their expectations for how high rates may eventually go.

The effective interest rate on 10-year benchmark US bonds reached their highest level for seven years after the latest snapshot of the American labour market showed fewer workers claiming jobless benefits and the normal concern that this could lead to pressure for higher wages.

Demand for new cars fell by around 20pc in September, according to an industry body. The Society of Motor Manufacturers and Traders (SMMT) said around 339,000 new cars were registered during what is normally one of the industry’s strongest months due to the release of new number plates. Diesel and petrol registrations were down year-on-year, with a modest rise for alternatively fuelled cars such as pure electrics and hybrids. The SMMT said the decline was mainly due to changes to the way new cars are tested, with tougher emissions regulations introduced in the European Union. Industry commentators expect that Brexit worries and weak consumer confidence are also weighing on car sales.

Aston Martin had a disappointing stock market debut, with shares in the luxury carmaker dipping as low as £17.75 when trading got under way, having opened at £19. Aston Martin sold about 25pc of its stock, with the offer open to institutional investors, company staff, customers and members of the Aston Martin Owners Club resident in the UK. Private investors will be eligible to buy shares from Monday 8th.

UK house prices rose gradually in September but the London market continued to fall, according to the latest house-price report from Nationwide. The data showed an average 2pc annual price increase across the UK, with an average 0.3pc rise in August/September. However, average London prices fell by 0.7pc in the same period. Yorkshire & Humberside was the UK’s strongest region, with prices up by 5.8pc over the year. Commentators say that until the threat of a no-deal Brexit is gone, buyers and sellers will hold back from the market.

With report after report claiming that another top shareholder was preparing to vote down Unilever’s proposed move from London, the company finally caved to investor pressure and decided to retain its UK headquarters. Misjudging the anger among its investors could potentially see heads roll in the consumer goods giant’s top team.

By David Pegler, Brighton Capital Management