October 24, 2017

Pegler’s market report – 24.10.17: Interest rates chatter continues to steal the limelight

As published in the Brighton Argus (24.10.17) Business section under the title Pegler’s Market Report:

Interest rates chatter continues to steal the limelight

With the last couple of weeks dominated by speculation over whether the Bank of England and US Federal Reserve will hike interest rates before the end of the year, the European Central Bank has been drifting towards its own major monetary policy tightening milestone due next week.

The ECB’s Governing Council will meet on Thursday and is expected to unveil how it plans to unwind its €60bn-a-month quantitative easing programme.

The UK’s deficit has fallen to its lowest level since 2007 to provide Chancellor Philip Hammond with a little more wriggle room in his Budget next month. Public sector net borrowing came in at £5.9bn in September, below economists’ expectations, meaning that the Government is set to undershoot the OBR’s more-gloomy forecasts.

The president of The European Council, Donald Tusk, has said the leaders of the remaining 27 EU states have agreed to discuss a trade deal with Britain among themselves. But he said not enough progress had been made at the summit in Brussels to move on to the next stage of negotiations with the UK. Theresa May has said she is “ambitious and positive” for Britain’s negotiations with the EU but there is still “some way to go” in the talks.

Homeserve, which provides home emergency, repair and heating installation services and earlier in the year bought a 40% stake in local star, Checkatrade, continued its expansion overseas with news that it will acquire certain trade and assets of US based Dominion Energy for $143m. The company expects the acquisition to accelerate the growth of its North American business. To fund the deal, Homeserve plans to raise GBP125 million via an accelerated share book build process.

Other news included an important tie up in the media space. Brandwatch, the leading enterprise social intelligence company based in Brighton, recently announced its acquisition of BuzzSumo, the world’s most popular content marketing and influencer identification platform. The combination of two companies’ complementary technologies represents a formidable force. One of the trends of the last few years has been the growth of content marketing driven in part by how much we use social networks to share stories with our friends and followers.

Finally, Google’s parent company Alphabet is leading a $1bn round of new funding for ride-hailing company Lyft that will help it step up its challenge to larger rival Uber. The funding is being led by CapitalG, Alphabet’s growth investment fund, which has also backed tech companies such as home-renting platform Airbnb and payments firm Stripe. It is the latest challenge to Uber, which is appealing against a decision by London transport bosses to strip it of its licence to operate in the capital. The investment represents a further complication in the tangled web of alliances in the sector.

By David Pegler, Brighton Capital Management