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UK Index is down 10pts in early morning trading after plumbing 4-month lows overnight as full-on risk off mood is dominating investor sentiment leading into the weekend.
Global financial markets continue getting pummelled by the vagaries of Trump administration’s trade policies. White House has come out guns blazing on trade issues overnight, as Donald Trump ixnayed EU’s olive branch on auto tariffs out of hand, threatened to leave the WTO, dug-in on his negotiations with Canada on NAFTA Part Deux and is reportedly close to authorising increased tariffs on $200bn in Chinese imports. A busy day for The Donald and the man isn’t going to stop any time soon.
Valiant efforts by Whitbread to stench the bleeding (adding 5 points to the benchmark index) are proving insufficient on the backdrop of UK Index Housebuilders reeling from the biggest monthly drop in Nationwide House Price index in 6 years, with Taylor Wimpey the biggest sector laggard. House Prices are down 0.5% month-on-month, a significant drop from upwardly-revised 0.7% growth a month before and well below expected 0.1% growth. On an annual basis, 2% house price growth was well below market consensus of 2.5%, with much of the fall in demand attributable to Brexit uncertainty.
Outside of Whitbread, whose management (but not yet shareholders, mind you) agreed to sell Costa Coffee to Coca-Cola for £3.9bn (half of Whitbread’s market capitalisation), no other company is adding more than a single point to the UK Index .
On the other side of the equation, the index is being pressured by Energy companies (oil prices down), Glencore/BHP Billiton/Anglo American (Miners ignoring positive Chinese PMI data, focused on worries over US-China trade spat and metals tariffs), Sage Group (CEO stepping down and FY revenue outlook still dependent on closing a number of opportunities in September), AstraZeneca (failure of its Phase III lupus treatment trials) and GlaxoSmithKline (sector read-across from AstraZeneca).
The laggards, each of them stealing 1-3 points from the benchmark, are far outweighing the positive performers today. Expect more of the same as the day moves on. Risk-off sentiment has grabbed the steering wheel and isn’t letting go for the time being.
Artjom Hatsaturjants, Research Analyst, 31 August 2018
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