Weekly Investment Update
10 October 2017

Headlines
Supermarket giant Tesco has seen an improvement in its results as H1 pre-tax profits rose to £562m, up from just £71m at the same time last year. It also announced plans to start paying a dividend again.

Annual profits at sofa and furniture retailer DFS have dropped 22% to £50m, in what it described as a very challenging market. Revenues increased by 1% to £763m.

The £833m deal that sees Hewlett Packard buy the printer business of Samsung Electronics has gained the Chinese government’s approval, albeit with some restrictions put in place by Beijing.

UK firm Dialog Semiconductor, whose chips are used in iPhones, has paid £234m to buy California based chipmaker Silego Technology.

As many as 2,000 jobs are to be cut by BAE Systems from its military, maritime and intelligence services across the UK. The cuts from the existing 34,600 British employees will come from various sites.

Aldi, the German supermarket chain, is to spend £75m building a new distribution centre in Bedford which is expected to create 400 jobs.

Domino’s Pizza, the UK’s largest pizza delivery business, has seen sales for the 13 weeks to 24 September rise 21% to £286m.

Economic News
The UK’s dominant service sector saw activity increase in September according to the latest survey. Data from the ONS shows that the productivity of UK workers fell by 0.1% in Q2 which follows a fall of 0.5% in Q1.

The economic growth of Scotland reduced to 0.1% in Q2, down from 0.6% in Q1. Year-on-year Scotland’s GDP growth was 0.5% behind the equivalent UK growth of 1.5%.

In the US employment in September fell for the first time since 2010, with 33,000 jobs lost following hurricanes Harvey and Irma. However, the unemployment rate fell by 0.2% to 4.2% as the US Labor Department uses separate data to measure payrolls and unemployment.

The S&P 500 index in the US broke a 20-year record last week when on Thursday it closed for the sixth consecutive day on a record high level.

The official deadline for spending the old round one pound coins is this Sunday. The Royal Mint estimates around 1.2 billion of the old coins will have been handed in by the weekend leaving 500 million still in circulation.

The Marketplace

  • Oil fell 3.3% on the week with Brent at USD 55.6
  • Gold fell 0.8% to 1273.5
  • US and Turkey suspend visas in escalations of their diplomatic row
  • Central banks set to cut quantitative easing

Market Focus

US

  • The VIX volatility index is still with last Thursday’s level of 9.19 marking an all-time low
  • The S&P 500 Index closed at 2549, last Thursday saw another record high at 2552
  • 10 year Treasury yields are at 2.4%
  • The Dow Jones index ended the week at 22774, up 1.7%
  • The Nasdaq was up 1.4% at 6065
  • September employment figures declined by 33,000 marking the first decline since 2010. Hurricanes Harvey and Irma seen as major factors~$90 billion losses likely to affect data. Average hourly earnings increased to 2.9 year on year (versus 2.6% expected)

UK

  • PMI unexpectedly fell to 48.1 marking a tilt into contraction
  • Consumer spending fell by 0.3% in September marking four out of five months of falls. Expected price rises likely to exacerbate the situation
  • Construction shrinks for the first time in a year.
  • The FTSE was up 2% on the week, closing at 7523
  • GBP drops to its lowest level in a month against the dollar

Europe

  • European stocks gained on the back of German production data which had the best month in six years. Production was up 4.7% over 12 months and output increased 2.6% since July
  • The Eurostoxx 50 finished the week up 0.2% at 3603
  • The Dax increased 1% to 12956
  • Spanish banks mull moving operations out of Catalonia to other regions to temper the separatists. Unilateral declaration of independence is looking less likely

Asia

  • The Nikkei was up 1.6% at 20691
  • The Hang Seng finished the week up 3.8% at 28458
  • Indian 10 year treasury yield set to rise to 6.85%
  • MSCI Emerging Markets Index had its biggest weekly gain since August closing at 1103 on Friday

Courtesy of Legal & General
Source: Bloomberg.
Returns in local currency unless otherwise stated.

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