"Both the S&P-500 and the NASDAQ closed at new record highs yesterday. A significant increase crude oil prices enlivened US equities, as did a number of technology stocks following the global cyber-attack. WTI crude for June delivery had surged by US$1.30 to US$49.14/bbl by mid-session, after both the Saudi Arabian and Russian energy ministers indicated an agreement to freeze oil output will be extended until March of 2018. Oil service stocks also moved sharply higher tracking the major producers, driving the Philadelphia Oil Service Index up by 2% accompanied by 9 of the S&P-500’s 11 main sectors, including steels, airlines, biotechnology and housing stocks, the latter having been boosted by release of the NAHB/Wells Fargo Housing Market Index which rose to 70 in May, compared to 68 in April, while consensus forecasts had anticipated an unchanged figure. According to Thomson Reuters, about three-quarters of the S&P’s quarterly earnings reports to date have now exceeded consensus expectations. The fact is, however, that recent macro data from the US has been somewhat mixed, and yesterday was no exception with the New York Federal Reserve unexpectedly reporting a contraction in regional manufacturing activity in the month of May. Asian equity markets accordingly lacked direction during this morning’s trading, with firmer minerals prices only modestly lifting the commodity-heavy ASX off unchanged during the last hour of trading. The Nikkei 225 again failed to force its way through its key 20,000 resistance despite the boost received by its energy stocks, while the two principal Chinese markets pushed lower, on further reflection of Monday disappointed with retail sales and industrial production data, with growth slowing in April growth after disappointing fixed asset investment which increased just 8.9% compared with the same period in 2016. The UK’s FTSE-100 index closed up 0.3% yesterday, managing to also record a new record despite the Pound strengthening after receiving strong support for its heavy-weighted mining and oil stocks. Elsewhere, the majority of the European markets ended the first session of the new trading week with small gains or losses, with the final move recorded by the STOXX Europe 600 as unchanged. Today is a key date for UK macro data, with investors anticipating release of Consumer, Retail and Producer Price indices for April. Anything beyond the consensus forecasts of 2.7% for CPI, compared with 2.3% in March and the Bank of England’s target level of 2%, could start to test the Mark Carney’s resolve to leave rates unchanged throughout Brexit negotiations. The UK will also see the DCLG House Price Index release, while the EU details its March trade Balance, Q1 GDP and ZEW Economic Sentiment Survey for May. The US offers Housing Starts, Building Permits, Capacity Utilization and Industrial Production for April, along with its weekly Redbook Index and API Crude Stock. UK corporates publishing earnings or trading statements include Vodafone Group (VOD.L), ITE Group (ITE.L), BTG (BTG.L), EasyJet (EZJ.L), Premier Foods (PFD.L), Speedy Hire (SDY.L), CYBG (CYBG.L), Crest Nicholson (CRST.L) and Avon Rubber (AVON.L). Investors this morning will be keen to understand whether international tensions are set to rise once again, with reports from cybersecurity researchers suggesting they have identified a digital clue connecting the global ransomware assault to previous attacks by a group linked to North Korea while the US press accuses Trump of revealing classified intelligence to Russian envoys during a meeting last week. Such a background provides little direction for London’s opening this morning, suggesting equities will largely tread water until release of April’s inflation figures at 09:30hrs provides an anchor; the FTSE-100 is seen drifting just 5 points either side of unchanged in early business."
– Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 finished yesterday’s session 0.26% higher at 7,454.37 whilst the FTSE AIM All-Share index was up 0.19% at 976.78. In continental Europe, the CAC-40 finished up 0.22% at 5,417.40 whilst the DAX was 0.29% higher at 12,807.04.
Wall Street
In New York last night, the Dow Jones rose 0.41% to 20,981.94, the S&P-500 added 0.48% to stand at 2,401.32 and the Nasdaq rose 0.46% to 6,149.68.
Asia
In Asian markets this morning, the Nikkei 225 had improved 0.21% to 19,910.71, while the Hang Seng lost 0.25% to 25,308.29.
Oil
In early trade today, WTI crude was up 0.25% to $48.97/bbl and Brent was up 0.21% to $51.93/bbl.
Headlines
Labour ‘plans water industry nationalisation’
Labour would nationalise the multi-billion pound water industry if elected. Under proposals to be outlined in its manifesto on Tuesday, Labour would create nine new public bodies to run the water and sewage system in England. By ending the practice of paying dividends to shareholders, party sources say bills would be reduced by around £100 a year per household. Labour will also promise 30 hours free childcare for two to four-year-olds. Jeremy Corbyn will unveil a “radical and responsible” plan for government, pledging to change the country and govern “for the many not the few”. He will vow to reverse the austerity of recent years but also to “manage within our means”. A draft version of the document, which was leaked last week, committed a future Labour government to taking the railways and the Royal Mail back into public ownership while also nationalising the electricity distribution and transmission networks. Labour’s plans would also see the water industry, which was sold off by the government of Margaret Thatcher in 1989, return to public hands. If elected on 8 June, it would create nine new public bodies to run the water and sewage system in England and Wales, that would be publicly accountable, retaining the existing workforce.
Source: BBC News
Weekly diary
Click here to see all this week’s planned corporate and economic announcements.
Recommendations
During the three months to end-April 2017, the number of stocks on which Beaufort Securities published recommendations was 216, and the recommendations were as follows: Buy – 73; Speculative Buy – 118; Hold – 22; Sell – 3.
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