15 February 2019
The internationally-focused FTSE 100 closed up a handful of points at 7,197.01 on Thursday (14 February) as continuing Brexit ructions put the pound under pressure, inflating the relative value of its constituents’ overseas earnings. Other major global markets came under pressure after a disappointing set of US retail sales figures.
Next Tuesday (19 February) average earnings data from the UK may help show if the recent improvements in real wages (adjusted for inflation) is being sustained. The German ZEW Economic Sentiment survey may draw some attention given Germany only narrowly avoided recession in the final quarter of 2018 (see Economic update). On Wednesday (20 February) the minutes of the latest meeting of the US Federal Reserve on interest rates may offer further insight into the likely pace of future rate increases across the Atlantic. Next Thursday (21 February) investors can look forward to a series of purchasing managers’ index surveys from the Eurozone and durable goods data from the US. On Friday (22 February) investors may be looking for clues from European Central Bank chief Mario Draghi on the future direction of monetary policy when he completes a scheduled speech at the University of Bologna.
There was focus on the healthcare sector this week off the back of a mixed bag of corporate updates. On Thursday (14 February) pharmaceutical giant AstraZeneca (AZN) reported a ‘strong’ fourth quarter led by performance of new medicines underscored its return to growth and saw the drug maker meet its guidance. For the 12 months to 31 December, revenue fell 2% to $22.1 billion and product sales rose 4% to $21.05 billion, which was in line with guidance for low-single-digit growth. While earnings per share fell 19% to $3.46 a share, toward the upper end of guidance for earnings of $3.30 to $3.50 a share. The same day medical products firm ConvaTec (CTEC) admitted annual results were 'disappointing' even as they met the company's previously revised expectations. Investors were unconvinced by assurances that the company's 'Pivot to Growth' turnaround programme would help steady performance. For the 12 months ended 31 December 2018, revenue rose 3.8% to $1.8 billion and just 0.2% organically. While reported earnings (EBIT) were up 8% to $267.7 million due to lower restructuring and pre-IPO share-based payments. Elsewhere Indivior (INDV) reported a 51% increase in operating profit to £228 million for 2018 but warned of uncertainties over its Suboxone Film anti-opioid treatment in the US where it faces pressure from generic alternatives.
Official data shows the German economy flatlined in the final quarter, narrowly avoiding the technical definition of recession (two quarters of contraction). In this context investors will be looking for clues to see if there will be any improvement in 2019. The German ZEW Economic Sentiment survey on Tuesday (19 February), which is based on responses from 300 German institutional investors and analysts rating the six-month economic outlook for the country, could be instructive.
Investors looking for broad-based exposure to global equities could consider exchange-traded fund HSBC MSCI World (HMWO) which offers exposure to a basket of companies from developed markets for an ongoing charge of 0.15%.
20 February – High street lender Lloyds Banking’s (LLOY) 2018 numbers should be steady given recent guidance for stable margins. Consensus forecasts are for net profit of £4.2bn so the market reaction to the results will likely depend on whether profit comes in ahead, in line or below this figure. Investors may also look for some commentary on the highly competitive mortgage market.
21 February – When Barclays (BARC) reports its full year results for 2018 attention is likely to be on the performance of its investment banking business and if results from its US and European peers are a guide, the situation could be ugly. French rivals BNP Paribas and Societe Generale both cut their full year forecasts after trading profits fell sharply last quarter.
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