It continues to be a decent start to 2019 with US markets posting four successive weekly gains at the end of last week, the best run since August last year.
There appears to be much more cautious optimism than we saw at the end of 2018, helped in some part by a more cautious Federal Reserve, while corporate earnings, despite not being great, they haven’t been particularly disappointing either.
The recovery seen so far this month got an added boost on Friday with a strong end to the week on hopes of a thaw in US China trade talks, which carried on into Asia trade this morning.
European markets, on the other hand have opened slightly softer this morning, after the latest set of Chinese economic data showed that the Chinese economy grew at its slowest pace in over 25 years, an expansion of 6.6% for 2018.
That’s still a decent expansion by any standards, with the economy growing by 6.4% in Q4, however it reinforces the concerns of a slowdown that has prompted a series of measures by Chinese authorities this month to try and manage the worst effects of some sharp economic weakness that has spooked global investors.
It remains quite likely that the trade spat with the US has played a part in this latest slowdown, but investors should also factor in that it simply isn’t possible for the Chinese economy to grow at the pace that it has over the last ten years, in the next ten years, as the law of diminishing returns kicks in, and the economy becomes more mature.
Industrial production for December did improve slightly, coming in at 5.7%, above expectations of 5.4%, while the Chinese consumer remained cautious as retail sales rose 8.2%.
On the companies’ front defence contractor Meggitt (LON:MGGT) is in the news after announcing a 10 year $750m contract with US jet engine maker Pratt and Whitney, for composite parts for the F135 and F119.
Bookmaker William Hill (LON:WMH) also updated investors this morning with a preliminary end of year update which showed that full year profits declined 15% in 2018, coming in at £234m, in line with expectations, boosted by a decent performance in the US. Management said recent changes to gambling regulations in the US meant that they now had a presence in 7 US states.
Just Eat (LON:JE) also gave a sneak preview to its full year numbers, announcing expected revenue of £775 and underlying EBITDA of £168m. Guidance for 2019 was for revenues to rise to £995m, and boost EBITDA to £204m, though these numbers won’t include the losses from the Latin American business, as they are jointly managed with iFood, its joint venture partner.
The company also announced the departure of its CEO Peter Plumb to be replaced by Peter Duffy as interim CEO, with a fuller update to come on 6th March, when the full year numbers are released.
The pound has come under some early pressure at the beginning of the week as Prime Minister Theresa May gets set to outline her so called Plan B.
Early indications would suggest that it probably isn’t going to be that much different from her Plan A which was so emphatically rejected by MPs last week. Some of the latest commentary has suggested that the UK government was considering amending the Good Friday agreement to address the issue of the Irish backstop, which is proving so contentious. This seems unlikely to happen, while MPs are reported to be mulling a plan to take control away from the government in order to prevent the prospect of a no deal Brexit, as the government continues to push back on significant changes.
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