August 15, 2017

Pegler’s market report – 15.08.17: North Korea tension dominates the markets again

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (15.08.17) Business section under the title Pegler’s Market Report:

North Korea tension dominates the markets again

Last week investors opted to dump riskier assets as relations between the US and North Korea intensified. The rogue Asian state said in its latest threat that it could strike the US Pacific island of Guam with four missiles within days. US stocks plunged into the red followed by European indices. The UK market also reversed recent gains but a sizeable chunk of the losses was attributed to a host of blue-chip giants going ex-dividend and a housebuilding sell-off after recent figures pointed to a slowing housing market.

UK exports fell in June despite hopes that the weak pound would boost sales overseas, leaving Britain’s manufacturing output flat on the month. Analysts had anticipated something of a recovery in June, setting the UK economy up for a stronger second half of the year. But the figures from the Office for National Statistics disappointed.

There was speculation that hundreds of Asda employees could be made redundant as the supermarket giant looks to make changes to 18 underperforming stores. Britain’s third-largest supermarket confirmed that it is consulting with more than three thousand employees in its stores about cutting staff numbers and hours, however the company stressed that it had no plans to shut 18 stores.

There was better news at bakery chain Greggs, after analysts became optimistic about the company’s potential to expand its product range and increase its store count.

Box office hits including Beauty and the Beast and Guardians of the Galaxy Volume 2 helped profits at Cineworld surge by more than half as the company pledged to keep expanding. The cinema group said the line-up of films so far this year had been more popular with audiences than last year, with admissions up 10pc to 50.7m – well above the 2.7pc growth rate last year. This meant pre-tax profits jumped on the back of sales of £420m, up nearly a fifth on the same period in 2016 thanks also to slightly higher ticket prices. A steep rise in the amount spent on food and drinks meant refreshments made up almost 25pc of revenue at £103m. The company has been developing its offering and now has Starbucks concessions in 25 cinemas.

DFS warned earlier this summer that it had been hit by significant declines in the number of people coming into its stores. It has now said the drop-off in footfall means profits for the year will be at the lower end of the guided range it issued alongside the June warning. The so called ‘Sofa Experts’ believe this to be an industry-wide issue, resulting from the uncertain economic environment and unexpected general election, exacerbated by warm weather in May and June.

Finally, rail company Go-Ahead, the operator of the beleaguered Southern network, has lost its bid for the West Midlands rail franchise to a rival offer pledging hundreds of new carriages and free Wi-Fi.

By David Pegler, Brighton Capital Management