Weekly Investment Update
24 October 2017

Headlines
Payments business PayPal has revealed better-than-expected Q3 profits of £425m, up 32% from last year. Revenues grew by 21% to £2.5bn. Chinese micro-lender Qudian is to float on the US stock market and hopes to raise around £682m.

Technology giant IBM has seen the move towards cloud computing and cyber security yield results, with revenues from that part of its business growing by 11% to £6.6bn from a year earlier. Overall revenues in Q3 dipped slightly to £14.6bn with profits of £2.1bn.

The world’s largest maker of luxury cars, Daimler, has reported Q3 profits fell 17% to £2.1bn as revenues rose 6% to £36bn.

Streaming service Netflix has announced plans to raise £1.2bn from investors by issuing bonds, as it looks to spend around £6bn on content next year to keep pace with rivals.

Swiss elevator and escalator business Schindler has seen its Q3 net profits climb by 7% to £176m with sales of £2bn. Sainsbury’s has said it is to cut around 2,000 human resources jobs across both its supermarket and Argos businesses.

Bootmaker Dr Martens has enjoyed success in Asian markets leading to annual revenue growth of 25% to £290m in the year to 31 March.

Economic News
Britain recorded its smallest budget deficit for any September in the previous 10 years last month. The deficit stood at £5.9bn, a fall of 11% from the same month last year; the government currently borrows around £150m per day.

UK unemployment stood at 1.4 million in the three months to August. The fall of 52,000 leaves the jobless rate unchanged at 4.3%. The rate of employment has now
increased to 75.1%.

Following last week’s record highs the Nikkei 225 in Japan has continued its winning streak, following the results of the country’s general election, setting new records.

China’s economic growth for Q3 has come in at 6.8%. Other data from China showed that retail sales grew 10. 3% in September whilst factory output grew 6.6%. Australia’s unemployment rate has fallen to 5.5% in September.

A record £94bn worth of dividends is on track to be paid out to shareholders of UK listed companies this year. This beats the previous annual record high of £88bn in 2014.

The Marketplace

  • Oil rose 1% on the week with Brent standing at USD 57.9
  • Gold fell 1.6% to $1,275
  • Initial Coin Offerings (ICOs) in cryptocurrencies top $3 billion this year
  • Major currency volatility at three-month lows

Market Focus
US

  • The S&P 500 continues its run of record breaking weeks closing at 2,575, up 0.9%
  • Apple shares fell by 2.4% last Thursday on the back of ‘disappointing’ iPhone 8 orders
  • 10 year Treasury yields closed the week flat at 2.4% after a very up-and-down few days
  • Another record breaking week with The Dow Jones index ended the week at 23,329, up 2%
  • The Nasdaq finished up 0.3% another record breaking week
  • New chairman of the fed to be announced. Jerome Powell is the favourite and seen as the candidate most likely to maintain the status quo
  • The senate voted 51-49 in the budget resolution motion – a positive move towards further planned tax reforms

UK

  • Sterling declines as confidence in a rate rise fades
  • Unemployment fell by 52,000 between June and August. Jobless figures remain at a 42-year low
  • Inflation running at 3%, climbing at the highest pace in five years –predominantly on food and transport
  • The FTSE closed at 7,523, up 0.2% on the week
  • A ‘road map’ between the European council and the European commission to be prepared by December to address the future relationship with the UK.

Europe

  • The Eurostoxx had a flat week, closing at 3,605
  • Spain plans to suspend Catalonia’s autonomy, ousting the regional president. Catalan parliament to meet today with their response
  • Also an overall flat week on the Dax, closing at 12,991
  • The ECB confirmed it will halve monthly bond purchases from EUR60 billion to EUR 30 billion next year

Asia

  • The Nikkei was up 2.% at 21,696
  • The Hang Seng finished the week down 0.6% at 28,305
  • Xi Jinping gave twice in a decade party congress speech – warns of severe structural challenges that China faces to become a major superpower but claims that by 2050 china will become “a global leader in terms of comprehensive national strength and international influence”
  • 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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