Financial Market Research and Analysis

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UK retailers mixed, pharmaceuticals down
UK retailers opened mixed, despite encouraging sales data across the sector.

Tesco (-2.61%) sales growth reached its highest quarterly level in five years; the 13-week like-for-like sales in the UK expanded 1.8% by the end of November. Christmas sales were encouraging, as they have been for Sainsbury’s (-0.42%) and Wm Morrison Supermarkets (-0.96%). The figures left investors unconvinced, either because they were not good enough to boost the share price, or the seasonality could bite into the figures over the next couple of weeks.

Marks & Spencer (+5.02%) diverged positively as its UK sales expanded 4.5% in the third quarter, while the international sales surged 18.9% on the back of the cheaper pound.

The pound (+0.07%) was one of the weakest performers against the dwindling US dollar, as the Bank of England Governor Mark Carney said that the Brexit had the potential to amplify risks to the UK’s economy. Still the FTSE extended its record to 7328.51p.

London banks demand a special Brexit deal, to secure their access to the EU business as well as to talent. The enthusiasm could rapidly fade given that PM Theresa May has already cited that the UK’s financial businesses would not benefit from special treatment.

The healthcare stocks were the biggest losers in London, on the back of Donald Trump’s nightmarish comments. Trump would like to see the US drug makers back to the country, but more importantly, he would like to start negotiating the drug prices, which could heavily weigh on pharmaceutical revenues.

GlaxoSmithKline (-0.60%), AstraZeneca (-1.02%) and Shire (-2.00%) were offered at the London open, Novartis (-1.48%) sold off in Zürich.


Trump’s speech disappointed amid lack of details

The US President-elect Donald Trump delivered his first press conference yesterday. The lack of details, especially regarding his fiscal policy plans, disappointed the financial markets, although he reiterated his commitment for business-friendly tax cuts, deregulation and ‘very large border tax’ to prevent US companies from shifting their production abroad.

Investors’ enthusiasm was also dented by Russian spy shenanigans, Trump’s anti-Chinese stance, the wall-building rhetoric and also the questionable ethics regarding the new President’s plans to maintain his ownership in his business empire despite leaving his responsibilities to his sons.

Donald Trump said he would be the ‘greatest jobs producer that God has ever created’, yet did not comment on concrete numbers, such as the 500 billion spending plan he had previously hinted at.

All in all, the Trump-magic didn’t happen this time around. The US Treasuries rose on no further details, while the US dollar softened. Still, the US equity markets traded marginally higher. The S&P500 gained 0.38%, while the Down Jones traded just shy from the 20’000 level.

The cherry on top, was comments made by Secretary of State Nominee Tillerson, who said that China couldn’t access the South China Sea Islands, reviving tensions with China.

The US equity futures traded down in Asia.

The Federal Reserve (Fed) Chair Janet Yellen is due to speak later in the day. We do not expect any insightful comments regarding the future of the US monetary policy. The US markets will likely trade on the Trump frustration.

The Dow Jones is called 52 points lower at $19902 the US open, the S&P500 is seen 6 points softer at $2269.


ECB doves could cap the euro appetite

The broad based USD depreciation helped the EURUSD higher. The pair extended gains to 1.0615 ahead of the release of the European Central Bank (ECB) meeting minutes due today. The ECB reduced the size of its Quantitative Easing (QE) programme from 80 to 60 billion euros, yet committed to continue its purchases until December 2017, and beyond if needed. The minutes will likely lean towards the ECB doves. If this is the case, we could see limited upside in the EURUSD. The key mid-term support stands at 1.0707 (major 38.2% retracement on post-Trump USD rally).

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