The FTSE opened lower this morning and the pound weakened against the dollar and the euro as Britain emerged from yet another Brexit-induced political crisis after Theresa May’s government survived a no-confidence vote called by Labour last night.
Sterling rallied to $1.2896 in the immediate aftermath of the vote but following some sideways trading overnight it plunged in early London trade only to start regaining ground this morning. The rally was no surprise as the markets have been pricing in that the PM would survive the vote. The pound/euro moves followed the same trajectory as cable but were less volatile.
This morning’s FTSE chart reflects the same sense of bafflement that is dominating UK politics right now as it remains unclear what will happen next. The index opened lower only to surge up and then repeated the same sharp up and down move in the first half hour of trading. The result of the vote should mean marginally more stability over the next few days as the government pushes on with a Brexit proposal in some form.
Given that her Brexit proposal was soundly rejected on Tuesday Theresa May now has until Monday to come up with a Plan B. She is expected to meet with opposition leaders Thursday to try and find more middle ground before heading to Europe for further negotiations.
Asian stocks traded higher, taking their cue from a strong Wall Street close helped by strong results from major banks. However, Asian gains were muted by news that the US is planning a probe into China’s Huawei over alleged stealing of trade secrets from US companies.
Societe Generale (PA:SOGN) warns of fourth quarter fall
The French bank has warned that it expects its business to have declined 20% in the fourth quarter of 2018 and by 10% for the whole year because of the challenging environment in global capital markets. Soc Gen’s revenue decline mirrors similar results reported by US banks Citigroup (NYSE:C) and JPMorgan (NYSE:JPM) earlier this week, all of their trading books hit by the roller coaster in the US markets in the pre-Christmas weeks.
The manic up and down in the markets had been sparked by the expectations that the Federal Reserve’s strict interest rate hiking plan for 2019 would unduly slow down the US economy. However, with the Fed changing tack before year end bond markets seem to have returned to a more sedate pace of trade. So far only Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) managed to defy expectations and post a higher-than-expected fourth quarter earnings statement. Morgan Stanley(NYSE:MS) (NYSE:MS) is due to report later today and the market is skewing towards stronger results.
In Europe, however, banks are more likely to replicate Soc Gen’s results, particularly major banks with large trading portfolios. Deutsche Bank's (LON:0H7D) investment bank unit has already reported one of the worst years since the financial crisis.
This is a sure and steady update from Experian (LON:EXPN) that shows it's very much on track to meet the top end of its full-year guidance.
Organic revenue growth is again evident in all regions and it's good to see a substantial improvement in the UK consumer services division.
Management had forecast UK consumer services revenue to start growing again in the second half, which still looks achievable now that the decline in the third quarter has narrowed to 1%, compared to the first half's 6% fall.
Businesses are still clearly looking to get an edge over their competitors by tapping Experian's vast data troves to analyse customer behaviour.
An ongoing economic recovery in the US is helping matters by allowing companies to shell out more on digital transformation strategies, for which big-data mining is often a centerpiece.
Regulatory risk will always hang over Experian as governments, particularly in Europe, pledge to clamp down on alleged misuses of people's personal information. So far, though Experian has successfully played the situation to its advantage, by assuring customers that it's better placed than competitors to navigate new rules and offer data that won't get them into hot water
Primark has deftly negotiated what was particularly perilous Christmas trading period
Like-for-like sales are only down slightly on the previous year, while a total sales rise of 4% has met the expectations of a market accustomed to seeing Primark outperform its peers.
One again it appears that economic uncertainty in Britain, at this stage centered largely on Brexit, has driven cautious consumers into the arms of discount retailers.
Associated British Foods's (LON:ABF) sugar business is struggling, as expected, but the steady performance at its other division, most notably Primark, has put the company on track to meets its annual guidance.
A small black spot in this result is the 10% cut to the forecast increase in Primark's net selling space this financial year, owing in part to a delayed store opening in New Jersey.
Crucially, though, Primark's US expansion appears to have gotten off to an otherwise excellent start. And that's the place where a lot of the company's future growth will have to come from.
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