Today's edition features:
"It's clearly going to take a lot to meaningfully unnerve the US markets right now. The rejection of Trump's Healthcare Reform Bill failed to do so, neither did Paul Ryan's suggestion that the executive and legislative branches of government weren't in sync on tax policy, nor the FOMC's hawkish proposals to shrink the Fed's US4.5tr balance sheet. So, last night's cruise missile attack on a Syrian airbase, which some suggest was an unsophisticated and emotional response from the White House, will probably not do it either. The principal US indices had closed with minor gains across the board before the news broke, with most looking toward this afternoons key monthly Non-Farm Payrolls figures while also anticipating an update on the highly sensitive two days of meetings between Trump and Chinese leader Xi Jinping in Florida. Asian equity markets, however, erased some of their early gains as investors flocked to safe-haven assets and US stock-index futures moved from flat to half a point down. Australia's S&P/ASX 200 ended in the negative after opening firmly up, while the Hang Seng also sold off, although a volatile Nikkei recovered back into the positive by the close despite the US$ falling sharply overnight down to Y110.20, as did the Shanghai Composite. This caution is likely to be reflected in Europe's openings this morning as, amongst other things, traders consider whether Trump was in fact intentionally sending a message to China regarding US willingness to take independent action against North Korea, should the Sino administration remain unwilling. There is a very large number of global macro releases due today. From the UK, investors should anticipate Halifax March House Prices, February Industrial Production, Trade Balance and NIESR GDP estimates, along with a speech from the Governor of the Bank of England. The US will release its much-followed Non-Farm Payroll data for March, along with Average Earnings and February's Consumer Credit Change figures. Economists looking keenly for any sign of flagging momentum in the US after two strong months of hiring that appear to have been boosted, in part, by unusually warm winter weather; the worry being that any further decline in the unemployment rate, combined with a pick-up in wage growth, would point to a tightening labour market and prompt Fed officials to consider a more rapid pace of rate increases than presently discounted in order to tame a potential inflationary spike. The consensus forecast a gain of 175,000 jobs and an unemployment rate of 4.7%. Beyond this, traders will be keen to read any formal statement or watch a press conference following the ending of President Trump's meetings with Chinese Leader, Xi Jinping, in the hope that greater transparency regarding the future trading relationship two nations' becomes apparent. There are no significant UK corporates due to provide earnings or trading updates today. A nervous London is seen opening lower, with the FTSE-100 seen down 15 to 20 points in early business."
- Barry Gibb, Research Analyst
Markets
Europe
The FTSE-100 finished yesterday's session 0.39% lower at 7,303.20 whilst the FTSE AIM All-Share index shed 0.03% to stand at 930.03. In continental Europe, the CAC-40 finished up 0.58% at 5,121.44 whilst the DAX was 0.11% lower at 12,230.89.
Wall Street
In New York last night, the Dow Jones rose 0.07% to 20,662.95, the S&P-500 firmed 0.19% to 2,357.49 and the Nasdaq gained 0.25% to 5,878.95.
Asia
In Asian markets this morning, the Nikkei 225 had risen 0.51% to 18,691.56, while the Hang Seng fell 0.6% to 24,128.06.
Oil
In early trade today, WTI crude was down up 1.61% to $52.53/bbl and Brent was up 1.42% to $55.67/bbl.
Headlines
German Mittelstand wants 'soft Brexit'
Germany's "Mittelstand" of small and medium-sized firms (SMEs) could lose billions of euros if the UK is shut out of the single market, an industry representative has warned. The boss of the BVMW, which represents more than 270,000 SMEs, told the BBC "a hard Brexit would harm both sides". Mario Ohoven added that negotiations should be "guided by economic sense and not by political ideologues". The remarks diverge from the position taken by other leading German voices. In September last year, the head of the BDI, a powerful German business lobby whose members are larger companies, told the BBC it was "better to have a hard Brexit that works". German politicians have almost unanimously underlined that the UK cannot have unfettered access to the single market unless it allows for the free movement of EU citizens. In her letter to the EU last week, Theresa May said the UK would "not seek membership of the single market" in the upcoming negotiations.
Source: BBC News
Company news
Unilever (LON:ULVR, 3,978.00p) – Buy
Unilever Plc, a consumer goods company manufacturing, distributing and marketing branded and packaged goods, yesterday provided its business review. The key highlights include; 1) targeting a 20% underlying operating margin (before restructuring) by 2020; 2) combining Foods and Refreshment into one organisation; 3) exit Spreads business and a review of dual-headed legal structure; 4) net debt/EBITDA target of 2x; 5) share buy-back of €5 billion during FY2017; 6) dividend raised by +12%; 7) expected cumulative savings of €6 billion from €4 billion by 2020; and 8) total restructuring costs for the 2017-2019 of €3.5 billion. Unilever's Chairman, Marijn Dekkers, commented "[The review] has confirmed that our model of long-term shareholder value creation has been successful and remains as valid as ever. The actions we are now going to take are fully supported by the Board". Unilever also said it is reviewing to "simplify" its position as a dual-listed company.
Our view: Unilever has reconfirmed commitment to its proven long-term model of compounding growth and sustainable value creation. The outcome of the review is a further positive for shareholders, with €5bn of sweeteners being offered to stave off another predatory approach. The Board has strengthened its focus on cost cutting, reducing advertising and external consultants, while integration of Foods and Refreshment business is expected to bring synergies and faster margin growth. All together, these initiatives are expected to deliver higher cumulative cost savings. The targeted underlying operating margin of 20% (FY2016: 16.4%) was a little higher than expected, and the Group's future confidence is reflected in its enhanced shareholder return of €5 billion share buy-back and +12% dividend increase in FY2017. Looking ahead, the Group has confirmed that it remains on course to deliver like-for-like sales growth in the range of 3%-5% (FY2016: +3.7%), continuing to outperform its underlying markets, and expect an underlying operating margin improvement of "at least" 0.8%. Given the Group's much higher share price since the offer from Kraft Heinz (which has been rejected by the Unilever and subsequently withdrawn), we see yesterday's business review as another positive step towards accelerated long-term growth to deliver greater shareholder value. Should it slip up on the way, a renewed approach looks just about inevitable. The shares are now valued at FY2017E P/E of 22.6x, along with dividend yield of 3.1%. Having surpassed our price target of 3800p, we have also reviewed our future expectations for the Group in response to its more proactive stance, as a result of which our price target has now been moved to 4330p. Beaufort reiterates Buy rating on the shares. Unilever is one of Beaufort's 'Tips for 2017' recommendations.