February 23, 2016

Pegler’s market report – 23.02.16

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (23.02.16) Business on page 21 under the title Pegler’s Market Report:

The Trampoline market

Following a week of panic that shook world stock markets, when investors dumped equities and fled to safe haven assets amid concerns about the health of the banking sector and the global economy, the FTSE-100 recovered strongly, rising 8.9% after closing at 5,537 on Thursday 11th and reaching 6,030 a week later. Commentators reported on a so called ‘Trampoline market’, where sentiment rather than fundamentals was continuing to dominate share price movements.

UK inflation crept up for a third month in a row in January, though economists said cuts in energy bills were likely to keep growth “close to zero” in the coming months and data near historically low levels. Britain’s job rich recovery pushed employment to a record high at the end of 2015, though a marked decline in wage growth since last summer suggests the Bank of England remains a long way from raising interest rates.

Over the coming weeks the economic focus in the UK is likely to shift to further discussions about the possibility of BREXIT (British exit from the EU) now with the referendum date firmly in the diary for June 23rd. This could lead to more uncertainty and indeed volatility, especially in respect to sterling.

After a disappointing Christmas run-up, retail sales surged by 2.3% month on month in January (way above expectations of 0.8%). The large rise was fairly broad based and was led by demand for clothing and computers, helped along by post-Christmas price cuts.

One company that is still struggling is Asda, which reported its sixth consecutive quarter of declining sales, losing market share not just to discounters Aldi and Lidl but major rivals Tesco, Morrisons and Sainsbury’s as well.

Go-Ahead, which operates the Thameslink, Southern and Southeastern rail franchises, released financial results and a 17% rise in profits last week although it also had to face a barrage of questions about their treatment of customers.

Elsewhere, shares in UK Oil and Gas Investments soared after the Aim-listed developer claimed that oil from the so called “Gatwick gusher” at Horse Hill flowed from 900m below ground level to the surface without extra help from operators, and at a better rate than expected of 463 barrels a day.

By David Pegler, Brighton Capital Management