July 18, 2017

Pegler’s market report – 18.07.17: Banks are back!

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (18.07.17) Business section under the title Pegler’s Market Report:

Banks are back!

JPMorgan has earned $26.5bn in profit over the past 12 months, the most ever by any major US bank. While trading results reported were worse than the firm had warned, second-quarter earnings set a record and the company said it will increase loans to companies and consumers this year at a rate that’s double what analysts expected.

The biggest US bank kicked off earnings season for the industry, offering insight into how the financial giants have performed of late and suggesting that banks are back in favour. It is expected that US banks have benefited from higher interest rates as the Federal Reserve raised its benchmark lending rate for the third time in six months in June.

Shares in Royal Mail came under pressure after its proposal to reform its pension scheme received a mixed reaction from unions. While Unite said that the new defined benefit pension scheme was the “best available deal for plan members”, the Communication Workers’ Union has rejected the proposal.

Low-cost carrier easyJet will launch a new division in Austria aimed at shoring up its future post-Brexit. The Luton-based airline had already announced that it was seeking an air operator certificate, known as an AOC, on mainland Europe, which it said would enable it to continue flying intra-European routes if the UK and EU fail to strike a deal on aviation before March 2019. There has been growing concern among airlines that a new deal, which would replicate current arrangements allowing flights between EU states, might not be put in place before the UK leaves the union.

Mike Ashley has snapped up a stake of more than 25pc in struggling video game retailer Game Digital. The move, made through Mr Ashley’s Sports Direct, adds Game to the controversial tycoon’s growing high-street empire, which includes stakes in French Connection, Debenhams and Findel. Mr Ashley has swooped on Game just weeks after the retailer’s share price plunged by 36pc following a third profit warning. Game blamed the latest warning on a low supply of Nintendo Switch consoles and a weaker line-up of games.

Elsewhere, construction giant Carillion shocked shareholders with a profit warning and conceded that debt is larger than expected. As a result, its share price has been crucified over the last week, highlighting investors have little appetite for companies that disappoint in any meaningful way.

Finally, it may not be surprising to hear that companies are putting off making long-term decisions about their plans to expand while the UK’s exit of the European Union is negotiated. Generally, employment in the UK is relatively stable however many companies are reluctant to commit to any major hiring sprees while there continues to be political and economic uncertainty.

By David Pegler, Brighton Capital Management