As we come to the end of a brutal week for equity markets it is becoming slowly apparent that all the optimism around global growth from bodies like the OECD and the IMF at the beginning of the year is not one that is universally shared, particularity where equity investors are concerned.
Central bank guidance remains one of cautious optimism as they look to tighten further in the months ahead, however the overriding narrative at the moment is one of tension around future trade relations, between the various global trading blocs.
At the beginning of the month President Trump indicated that he would implement tariffs in a 'loving way', maybe in an attempt to suggest that he didn’t want to spook equity investors. If recent price action is any guide markets are clearly not 'loving' what is happening right now, which is being exacerbated by rising concerns that the tech sector, which has driven most of the gains in US equity markets, could be on the cusp of being clobbered by increasing regulation, as well as possible taxation changes.
Against this backdrop this week’s final Q4 GDP revisions for the US and UK are likely to be mere footnotes, albeit noteworthy in the context of the overall economic performance of both economies during 2017, with particular attention likely to be on business investment performance.
29/3 - Recent economic data has suggested that the UK economy may well have got off to a slow start to the current year, after a strong end to 2017. This week’s final Q4 revision of the UK economy is expected to confirm a fairly decent end to the year, with annualised growth of 1.7%.
Recent revisions could see this number adjusted higher, though they aren’t likely to add any further weight to the argument that we could see a rate rise come around at the next Bank of England rate meeting in May, which remains very much on the table after this week’s wages data and subsequent rate decision which saw 2 policymakers vote for an increase in the benchmark rate to 0.75%.
Ladbrokes (LON:LCL) Coral Group FY
27/3 – Recent publicity about a crackdown on betting terminals has seen the share prices of bookmakers come under a cloud over the past few months. Ladbrokes has been able to withstand this better than most due to a decent performance from its sports betting business which has seen decent outperformance on revenues in recent quarters.
With a summer of sport on the horizon, including the football World Cup and the recent decision by the gambling regulator to propose a watering down of proposals to reduce maximum stakes on fixed odds betting terminals, the outlook seems a lot more positive than it was a few weeks ago. This is a likely to be a relief for shareholders, however with the share price already close to four year highs, there is a risk that most of the good news is already in the price.
A.G Barr Plc (LON:BAG) FY
27/3 – With the sugar tax due to come into effect in the next month the Irn Bru maker recently changed its recipe to some fairly mixed reviews from its longer standing fans. The change while criticised in some quarters doesn’t appear to have hurt its recent numbers which saw a 7.5% jump in revenue when it updated the market earlier this year.
Some of this improvement has been down to new product launches like Rubicon Spring. The increase in revenue may well have also been down to some consumers stockpiling stocks of the old Irn Bru before the recipe change, which may have brought forward some consumption. The real test will come in the coming months.
Monsanto (NYSE:MON) Q2
28/3 – In what has been a fairly long running saga the US seeds and GM foods company has been in a long standing $66bn tap dance with Germany’s Bayer (DE:BAYGN), as management try and push the merger through the various regulatory hurdles on both sides of the Atlantic. Earlier this month the shares dropped sharply after US regulators put new hurdles in its path.
The EU this week gave the merger the green light, though given its discomfort over GM foods the approval is conditional. The underlying business appears to be doing well despite all the background noise.
Walgreens Boots (NASDAQ:WBA) Q2
28/3 – Another consolidation story here with its recent bid for AmerisourceBergen (NYSE:ABC), which may well have been prompted by Amazon’s recent announcement of a foray into the US health care sector. The move appears to be coming from a position of weakness if its recent Q1 update is any guide which saw profits fall by 22% in the last quarter. Same store sales fell for the sixth quarter in a row, which when combined with falling margins are a concern.
This trend could well continue if Amazon (NASDAQ:AMZN) has its way, though we might see a profits boost from recent tax changes by the US government. Given the size of its store foot print we could see some closures on this front as well.
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