August 22, 2017

Pegler’s market report – 22.08.17: Barcelona terror attack weighs on investor sentiment

As published in the Brighton Argus (22.08.17) Business section under the title Pegler’s Market Report:

Barcelona terror attack weighs on investor sentiment

The terrible terror attacks in Barcelona and the US president’s deteriorating business reputation have weighed heavily on markets over recent days.

Donald Trump has now abandoned three business councils tasked with implementing his economic agenda, creating doubts for investors about the success of his $1 trillion infrastructure plan and deregulation agenda, which had underpinned much of the stock markets’ rise since his election.

The market’s attitude to risk has been highly volatile over the past fortnight, with the shift towards treasuries, gold, and the yen highlighting the anxiety evident of late.

The normal stock market casualties of any terror attack were immediately evident with British Airways-owner IAG, easyJet, InterContinental Hotels Group and Carnival all being dragged lower as investors fear that the latest atrocities will knock earnings in the tourism sector.

The spate of terror attacks that have used vehicles as weapons has sparked a surge in demand for anti-terror bollards and paving slabs, according to landscape products company Marshalls. The business makes paving stones, kerbs and street furniture such as benches and bollards. The company has benefited from a huge increase in inquiries about how these can be used to protect the public from vehicles mounting pavements.

Elsewhere, better-than-expected retail sales data presented a slightly rosier picture for British households. Resilient shoppers helped month-on-month sales grow by 0.3pc in July with recent industry data showing that wage growth is finally beginning to close the gap with inflation.

Other news on the high street included Argos repayment of almost £1.5m to more than 12,000 workers as part of a record £2m of back pay identified by Government investigations. There was also news of weak trading from B&Q owner, Kingfisher. It was mostly more of the same from Kingfisher with a massive outperformance by Screwfix trying gamely to mask an otherwise pretty ropey set of numbers from the rest of the group.

Demand for more expensive craft beers helped Carlsberg brew up a rise in sales and profits so far this year. The Danish brewer said the thirst for its more upmarket drinks such as Tuborg and Grimbergen meant that even though it sold less beer by volume, its revenues and profits both rose in the first six months of the year.

Finally, Brighton-based drug company Destiny Pharma is to float on London’s junior Aim market to raise upwards of £10m for a new treatment for antibiotic-resistant superbugs such as MRSA. The firm, whose chairman is City veteran Sir Nigel Rudd, the former chairman of Heathrow, will become only the second biotech company to float on the London stock market this year. The firm’s main project is XF-73, a drug that targets staphylococcus aureus infections most commonly found in hospitals.

By David Pegler, Brighton Capital Management