23 March 2018 Market Roundup Chart 1: UK Consumer Inflation (CPIH %) UK shares suffered heavy losses this week, taking the FTSE 100 index 6 below the 7,000 level for the first time since 2016. 5 On Monday, the blue-chip benchmark dropped 1.6%, with Micro Focus International plunging an eye-watering 47% after cutting its revenue 4 forecast and announcing the exit of its chief executive. But real estate 3 companies were in demand after shopping centre owner Hammerson 2 said it had rebuffed a takeover attempt by French rival Kleppiere. 1 Banks led the gainers on Tuesday, with RBS raising hopes that dividends could restart as early as mid-year if a US investigation into 0 mortgage mis-selling is resolved. Housebuilders also rose after solid results from Bellway, whose shares finished 3.5% higher. CPIH Annual Rate… Markets were nervous on Wednesday ahead of the US Federal Reserve’s decision on interest rates. B&Q-owner Kingfisher dropped Source: ONS Data at 23/3/2018 10.7% after issuing a cautious outlook. And a profit warning sent Moss Chart 2: UK Employment Growth (annual change; thousands) Bros down 23% to a six-year low. The FTSE 100 was off 0.3%. Thursday saw the FTSE 100 fall 1.2% on trade war worries. US share Men working full-time indexes were down more than 2%. Banks were big fallers, with Lloyds Banking Group off 1.6% and both Men working part-time Barclays and HSBC losing more than 2%. But Reckitt Benckiser jumped 4.8% after it pulled out of bidding for Pfizer’s consumer health Women working full-time unit. Women working part-time UK shares were down in early trading on Friday after heavy falls overnight in Asian markets. All in employment Company Focus: Bellway 0 100 200 300 400 500 First-half results from Bellway were broadly in line with the Component housebuilder’s February guidance, and it reported favourable market Source: ONS Data at 23/3/2018 conditions. Chart 3: Bellway, Revenue 31/12/2018 The developer built 4,741 homes in the six months to 31 January, a 1% 6.3% increase compared with the same period last year. 9% Finance director Keith Adey said the group is on track to build a record 10,000-plus homes this year: “We have never been there before and 36% we feel it’s a nice hurdle to get over as we continue to grow as a business.” The average price of a Bellway home rose 7.7% to £275,945 - helping push up pre-tax profits by 16.6% to £288.7m. 54% Bellway has continued to acquire land and has contracted to buy 6,726 plots worth more than £400m, on which it expects to generate a Private Housing - North Private Housing - South gross margin of more than 24%. Net debt at the end of January was Affordable Housing Other £131m but is expected to turn into a modest net cash position at the Source: Brewin Dolphin client note Data at 23/3/2018 financial year end in July. The interim dividend was increased by 28% to 48p per share. Brewin Dolphin Research Economic Roundup US developments were prominent this week, as President Trump announced tariffs on Chinese imports, raising fears of a trade war, and the Federal Reserve increased interest rates to a new target range of 1.5%-1.75%. On Thursday, President Trump announced tariffs on up to $60bn of Chinese imports, declaring that Beijing needed to pay the price for decades of unfairly acquiring US intellectual property. China, having said it would "fight to the end" in any trade war with the US, hit back on Friday with plans for tariffs on 128 US products accounting for about $3bn in imports. Meanwhile, new Fed chair Jay Powell presided over his first rate-setting meeting which, as expected, resulted in a quarter-point increase in the Federal Funds rate. The Fed still expects to raise interest rates three times overall in 2018, but is now projecting an extra increase in 2019. Back in the UK, the Bank of England kept interest rates on hold at 0.5%. This followed a bigger than expected drop in inflation in February. Consumer prices were 2.7% higher compared to a year earlier, according to the Office for National Statistics (ONS), down from 3% in January. The decline called into question whether UK interest rates will rise as quickly as previously predicted, though many economists still expect rate rise in May. Guy Foster, Brewin Dolphin’s Head of Research, foresees three rate hikes over the next 12 months, taking the base rate to 1.25%. UK wages rose at their fastest pace in nearly two-and-a-half years: 2.6% excluding bonuses in the three months to January. Average earnings including bonuses rose 2.8% from the same period a year earlier. The unemployment rate reduced to 4.3% in January from 4.4% in December – its lowest level since 1975. The number of people in work rose to 32.25m – up 400,000 in a year and lifting the employment rate to 75.3%, its highest since records began in 1971. There was also positive news on retail sales, which increased more than expected during February. Sales grew by 0.8% over the month, with a year-on-year increase of 1.5%, said the ONS. ONS figures also showed public sector net borrowing down £2.5bn to £41.4bn in the current financial year-to-date, compared with the same period in 2016/17. UK government borrowing this financial year remains on track to be the lowest for a decade. Company announcements that caught our attention this week Date Company Comment 21/3/2018 Kingfisher Kingfisher, owner of DIY brand B&Q and trade specialist Screwfix, cautioned that the outlook for the UK market was “more uncertain”. In France, its second largest market, Kingfisher said trading was “encouraging yet volatile.” Europe’s second largest home improvement retailer made an underlying pre-tax profit of £797m in the year ended 31 January, 1.3% above the £787m in 2016-17. Growth at Screwfix and in Poland was offset by weak performances in France, Russia and Spain. In France, Kingfisher’s like-for-like sales were off 3.5% with profits down 15%, on a constant currency basis, as competition intensified both on price and on quality. Like-for-like sales for the whole group were down 0.7% year-on- year, at constant currencies, to £11.7m. The full-year dividend was increased 4% to 10.8p. 21/3/2018 Reckitt Benckiser Reckitt Benckiser announced on Wednesday that it had ended discussions to buy “parts of” Pfizer’s consumer health division. Back in October, Pfizer had announced it was reviewing strategic alternatives for its consumer health business. In February, it emerged that Reckitt Benckiser and GlaxoSmithKline had bid for the unit. Reckitt dropped out of the sales process late on Wednesday and said its proposal had only been for part of the Pfizer business. The likely price tag for Pfizer’s entire consumer health unit was $15-$20bn, and Reckitt would have had to resort to either a rights issue or to the sale of its home and hygiene division to complete a deal. Reckitt chief executive Rakesh Kapoor said: “An acquisition for the whole Pfizer consumer health business did not fit our acquisition criteria and an acquisition of part of the business was not possible.” On Friday, GlaxoSmithKline also withdrew from bidding for the Pfizer unit. Brewin Dolphin Research Key Company Diary Dates Mon 26 Mar Pennon Group Trading update Mon 26 Mar United Utilities Trading update Tue 27 Mar Ferguson Half-year results Tue 27 Mar AG Barr Full-year results Thu 29 Mar Chesnara Full-year results Economic highlights over the next week Tue 27 Mar – Eurozone Business Confidence – The eurozone’s business climate indicator declined to 1.48 in February, a second monthly fall from December’s record high of 1.59. Thu 29 Mar – UK GDP – The Office for National Statistics’ final estimate of UK economic growth in the last three months of 2017. Previous estimates put growth at 0.4% over the fourth quarter. Thu 29 Mar – UK Consumer Confidence – The GfK consumer confidence index dropped one point to minus 10 in February 2018. Index Movements* Index Value %Change FTSE 100 6,952.59 -2.62 FTSE 250 19,393.89 -2.19 AIM 1,026.77 -2.72 Dow Jones 23,957.89 -3.68 S&P 500 2,643.69 -3.77 Hang Seng 31,071.05 -1.49 Nikkei 225 21,591.99 -0.97 Currency Movements* Currency Pair Value %Change £:$ 1.41 0.01 £:€ 1.15 0.02 £:¥ 149.55 0.01 Best & Worst performing sectors (rel. to FTSE 350)* Best & Worst FTSE 100 performing stocks* Sector %Change Company %Change Oil & Gas 2.30% London Stock Exchange 4.64% Chemicals 1.88% Standard Life Aberdeen 3.12% Banks 1.77% Antofagasta 2.71% Retail -2.95% British American Tobacco -8.49% Personal & Household Goods -3.43% Kingfisher -13.31% Technology -19.99% Micro Focus International -50.72% *Weekly movements up until close of business Thursday Important Notes: Main source of information: Company Report and Accounts, Bloomberg The value of investments and any income from them can fall and you may get back less than you invested. 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