May 23, 2017

Pegler’s market report – 23.05.17: A torrid time dominated by US political woes

by David Pegler

in Insights Press Releases

As published in the Brighton Argus (23.05.17) Business on page 21 under the title Pegler’s Market Report:

A torrid time dominated by US political woes

There was some recovery at the end of last week following a generally torrid few days dominated by US political woes. Trump, striking a defiant tone after days of political tumult, denied colluding with Russia during his 2016 campaign or asking Federal Bureau of Investigation’s director, James Comey, to drop a probe into disgraced former national security advisor Mike Flynn.

The biggest beneficiaries of the so-called ‘reflation trade’ that accelerated in the aftermath of Trump’s election win were initially the biggest fallers, such as commodity-related stocks, financials and construction stocks.

British factories enjoyed the biggest rise in output in more than three years in the quarter to May, as the weaker pound continued to bolster exports, according to the Confederation of British Industry (CBI). A survey by the business group showed robust growth in the mechanical engineering and chemicals sectors pushed output up at the fastest pace since December 2013.

UK retail sales also jumped as shoppers came out in force last month as good weather combined with the long Easter weekend boosted household spending.

British energy suppliers were more upbeat after the Conservative Party’s manifesto pledge to cap household energy tariffs eased fears about the severity of the caps, which had plagued the sector in recent weeks.

Cocktail bar Revolution has warned that the flood of costs hitting its business will be greater than it had expected, knocking nearly 30pc off its shares. The Ashton-Under-Lyne based company, with a presence in Brighton, highlighted the “well-publicised costs” that are hitting the business and its rivals, such as the national living wage, the apprenticeship levy and the above inflation increase in business rates. Not only this but its newly opened bars, which include its Revolucion De Cuba format, are taking longer to reach full profitability than management had previously expected.

Peppa Pig owner Entertainment One has commissioned 117 new episodes of the hit children’s animation. The new episodes of the show, which centres around the cartoon pig best known for jumping in muddy puddles, will launch in the spring of 2019. It comes after Peppa Pig cracked the US market, where it is broadcast seven days a week. Entertainment One now has 65 licensing partners in the country, and said earlier this year that Peppa Pig-related merchandise in US retail stores topped £160m last year. Two years ago the group set a goal of doubling global revenues from Peppa Pig to $2bn, after boosting its stake in the company that makes the programme.

Elsewhere, the competition watchdog has confirmed it will begin an in-depth investigation into Just Eat’s proposed £200m merger with Hungryhouse. The investigation centres around concerns that restaurants could end up with a worse deal after the merger between the two online takeaway services.

By David Pegler, Brighton Capital Management