Weekly Investment Update
17 October 2017

Headlines
Pay TV giant Sky has announced revenues for Q1 of its financial year grew 5% to £3.3bnfrom last year. It added 160,000 new customers which helped earnings rise by 11% to £582m.

Profits at US bank JP Morgan Chase climbed 7% to £5.1bn in Q3 as its revenues rose 3% to £19.8bn, despite trading revenues falling 21% year-on-year. Meanwhile, rival Citiroup saw revenues climb 2% to £13.8bn as profits rose 8% to £3.1bn from last year.

Results for Q3 at banking giant Wells Fargo were hit by a £759m charge over its mortgage underwriting during the 2008 financial crisis; leading to an 18% fall in profits to £3.5bn with revenues of £16.6bn. Elsewhere, Bank of America’s profits in Q3 grew 13% to £4.3bn.

Streaming service Netflix reported its best Q3 subscriber growth as it added 5.3 million new viewers in the quarter. Revenues rose 30% to £2.3bn from last year and net profits doubled to £99m.

Food services company Aramark is to buy Avendra, the hospitality supplies firm, and AmeriPride, a linen services business, for a combined £1.8bn. Asos, the online fashion retailer, revealed record
annual pre-tax profits of £80m, up 145%, with sales of £1.9bn over the year.

Economic News
The UK’s inflation rate, as measured by CPI, reached 3% in September, up by 0.1% from August; its highest since April 2012. Inflation is now 0.9% above wage growth. The state pension will see a boost as it grows by either 2.5%, earnings or the September CPI rate whichever is greatest.

Germany’s DAX stock market climbed above 13,000 points last week for the first time in its 30-year history to set a new record high.

In its latest World Economic Outlook, the International Monetary Fund has raised its predication for global growth to 3.6% for 2017 and 3.7% in 2018. Its forecast for the UK remains unchanged at 1.7% this year, falling to 1.5% for 2018.

Oil prices have grown by 1.2% to $57.80 a barrel for Brent crude over concerns about supplies from Iraq, the second largest supplier in the OPEC cartel.

In Japan the Nikkei 225 stock market hit a 21-year high last week closing at 20,881.2 its highest since 1996.

The Marketplace

  • Oil rose 2.8% on the week with Brent at USD 57.8
  • Gold rose 2.2% to $1305
  • Miners led a six month high in commodities
  • Global stock indices rise

Market Focus
US

  • The S&P 500 Index closed at 2553 (up 0.2%) in yet another record breaking week
  • 10 year Treasury yields remained steady on the previous week at 2.3%
  • Another record broken with The Dow Jones index ended the week at 22872, up 0.4%
  • The Nasdaq was up 0.5% at 6092, another record
  • September core inflation rose below expectations (1.34 vs 0.2 month-on-month) meaning expectations have been missed on six out of the last seven months
  • Donald Trump equivocates over the Iran nuclear deal. Talk of scrapping it all together toned down to a strengthening of existing restrictions

UK

  • British economy has dropped to the bottom of the group of seven growth league
  • Consumer price index is likely to show inflation running at 3%, throwing doubt on an expected rate rise in November
  • The FTSE was up 0.2% on the week, closing at 7535
  • Contingency planning for no deal in Brexit talks underway. Theresa May due to fly to Brussels on an unannounced visit to attempt to break the deadlock over the exit bill

Europe

  • ECB consider halving QE next year
  • The Eurostoxx has been at its calmest since 1991 based on 30-day historic volatility. Finished the week +0.2% at 3609
  • Austria’s far-right Freedom party set to join a coalition government
  • The Dax increased 0.3% to 12992
  • Catalonia declared independence but immediately suspended it. A market friendly move that sent the Ibex surging and tightening the spread between Spanish and German bonds

Asia

  • The Nikkei was up 2.7% at 21256
  • The Hang Seng finished the week up 0.8% at 28692
  • Japanese steelmaker Kobe’s shares declined by 40% over the week after it emerged the company has been falsifying quality statements for possibly more than a decade. One in of long line of corporate scandals to hit Japan recently
  • China’s CPI for September was in line with expectations at 1.6% year on year

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

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