Sunday, 17 April 2016

Stories we should be thinking about

Ahead of the new working week here are a few finance and related stories to be thinking about.

Macro matters:

Of course the big Sunday stories are likely to be the Doha oil talks and the Brazilian Presidential impeachment vote.  On the former I see that:

OPEC and non-OPEC ministers finish talks in Doha without an agreement, according to Reuters. They cite an unnamed source.

But whilst we wait for some more clarification/news on these matters...

With the UK EU referendum campaign now formally having kicked off and currently headline close polls (although I do feel that 'remain' will prevail and will pick up support as we get closer to polling day) I liked this which showed who was most/least sensitive when some economic numbers were introduced: 

Meanwhile this business poll of polls looks as you would expect...until you get to the Federation of Small Businesses and a surprisingly close result.  Interesting given that small businesses are the clear majority of job creators in an economy...

Switching to the broader European economy I was pleased to see that the Euro Area's growth is becoming more domestically-oriented.  This is just what you want to see - and mixed with more stimulus at the margin and current low expectations is just why you should be looking at this part of the world in an opportunistic manner: 

Turning to the US economy even though it is still growing faster than its European peer I see a few storms gathering indicating that to expect more than a single rate rise in the US this year feels like a real stretch...and this should keep the US dollar weak (and help support risk assets).  Anyhow back to the numbers/observations, fading industrial sector capacity utilisation...

...consumer credit going up but retail sales failing to respond equivalently.  That suggests a difficult underlying backdrop...

(h/t @LanceRoberts)

...especially if job creation is still quite skewed towards lower paid food/retail/accommodation jobs: 

No wonder Variant Perception's (@VrntPerception) wages long lead indicator is not flashing positively for US corporate profitability (more on the outlook for US corporate profits in the section below): 

At least the Chinese and Japanese have not yet stopped buying US Treasuries: 

Sector and companies: 

Given the above no great surprises that expected 2016 US S&P 500 earnings growth is a paltry 1.4% with only one sector above 10%...
...but still there's that mid-teen expectation for next year.  Of course the former could be too conservative but only if the US dollar fades further...

Excellent report by @UKValueInvestor here on the FTSE 250 valuation.  Such a middle-to-high valuation suggests to me opportunities are at a stock picking rather than a general level only especially given a general higher correlation with the UK (rather than the world) economy where pre-referendum concerns are rising...

...and I see the Financial Times website is running a Sunday story with the headline of:

Brexit doubts freeze business activity

Companies pull back on hiring and investment ahead of vote

A few stories from today's Sunday Times

Astra Zeneca is looking at bidding for Medivation a prostate cancer specialist who potentially have also attracted the interests of Sanofi, Roche and Gilead.  Good luck with AZN in landing this deal then...I still believe shareholders/the board should have snapped the hands off Pfizer the other year. 

HSBC chief executive Stuart Gulliver is expected to leave the bank in the next two years as the yet-to-be-appointed new Chairman will have a say on his successor.  Simplified but hardly covered himself in glory recently (but I still think the shares are cheap)

UK betting companies such as Ladbrokes and William Hill could take a £3m and £2m respective hit if Leicester win the Premier League

EasyJet is considering a bid for troubled airline Monarch with the potential attraction landing slots at Gatwick and increased capacity at Manchester, Birmingham and Luton.  

Elsewhere I see on Seeking Alpha that 'Vermont’s attorney general asks a federal court to force Monsanto, DuPont, Syngenta and other big seed and food companies to turn over internal research related to “potential health or environmental impacts” of GMO crops, as well as pesticides used on them'.  I don't think that it should derail the ChemChina/Syngenta deal in any way...

Interesting to see the shift in hotel development (and hence economic progress) in different parts of Africa: 

And finally...

Water beats soda...

...and a brilliant report here which identifies which was the most successful company to date created in a particular year.  Want to know which was the most successful company created in your year of birth...well now you can. 

(h/t @zackcapp) 

Have a good week

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