Tuesday, 01 March: Many investors will be honestly looking for a quieter month in terms of the markets. The start of the year has been a volatile ride and huge daily swings are a plenty. Surprisingly the FTSE 100 now sits above the level it started the year at, only just. Early this morning the FTSE was quick to reverse a negative open, following a mixed session in Asia where we saw disappointing Chinese manufacturing PMI data. The main London index was dragged down by a raft of poor earnings updates including Barclays, shares slumped heavily by over 11% after announcing they would cut the dividend by more than half in the next two years – the shares recovered slightly closing 8.11% down. The bank’s underlying full year profit has fallen 2% and further restructuring headaches lie ahead amongst other woes. Ashtead closed the day down c.9% after its Q3 update and both Glencore (-2.06%) and Fresnillo’s (-6.2%) profits have been hurt by falling commodity prices (unsurprisingly), the latter reducing 2016’s budgets in order to combat the struggling commodity prices.
On the contrary, the London Stock Exchange Group (LSE) sat at the top of the FTSE this morning after NYSE owner Intercontinental Exchange stated they’re considering an offer for the LSE although no official approach has yet been made. This comes after Deutsche Borse held merger talks with the Group last week. It means the LSE Group’s shares now trade nearly 25% higher than they did at the beginning of last week. LSE closed the day +7.17%.
UK manufacturing has fallen to a near three year low in February after a slowdown in new orders. The Markit/CIPS PMI fell to 50.8 last month, although indicating fractional growth (a figure above 50) it is down from January’s reading of 52.9 and the lowest since April 2013. One factor that may reverse this fall or at least provide some cover is the recent fall in the value of sterling following Brexit fears. As the pound falls it should encourage exports, but on the other hand imports become more expensive. As we write the pound is up 0.41% v EUR and 0.07% v USD.
Eurozone unemployment has fallen for the third month in a row to its lowest level since August 2011. The jobless rate fell from 10.4% to 10.3% between December and January. In the bigger European Union the unemployment rate dropped to 8.9%, down from 9% in December and this is the lowest reading since May 2009. Similar to the UK, PMI data disappointed for the Eurozone area as activity expanded at its slowest rate in a year, dropping to 51.2 from 52.3 a month earlier.
VW has warned that a deal with US authorities as a result of their emissions scandal may cost more and take longer. The VW boss has stated that the £5.2bn set aside already to cover the costs may be insufficient, meaning further provisions are likely in the future.