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CSS Investments Newsletter March 2016

CSS Investments Newsletter March Monthly Commentary


* The Federal Reserve will remain “patient” given the slowdown in global growth and weak commodities. The next Federal Reserve meeting on the 26-27th April is expected to see interest rates remain unchanged.

* Tata Steel whose Port Talbot operations have lost £2bn since 2010, is intending to close it’s UK business. The UK government is willing to offer incentives to buyers of Tata Steel assets but will draw the line at outright nationalisation.

* NEXT reported 2015 sales up 3% to £4.1bn and profit after tax up 5% to £666.8m. But a downbeat statement from Lord Wolfson “the year ahead may be the toughest faced since 2008” dented the shares. NEXT declined from £66.70 to £54.60 as a number of institutions lowered forecasts.

* CEO Friedrich Joussen commented in a trading update that TUI was “well positioned to deliver underlying EBITDA growth of at least 10%” in the 2016 financial year.

* C&W Communications is to be acquired by Liberty Global at an indicative value of 78.53p per share.

* Standard Chartered finance director Andy Halford bought 140k shares at 440.5p despite lingering concerns over Standard’s profitability in 2016.

* Just Retirement and Partnership Assurance agreed an all-share merger Partnership holders will receive 0.834 Just Retirement shares per share.

* McCormick has requested the board of Premier Foods engage with a revised 65p per share offer, the latter claimed the new offer still undervalues Premier.


1st April BoE Mark Carney Speech
4th April GB Construction PMI
5th April Halifax House Price Index/ Markit/ CIPS UK Services
8th April UK Balance of Trade/Industrial Production/NIESR GDP Estimate
11th April UK Consumer Inflation Expectations
12th April UK Core Inflation/Retail Price Index
14th April BoE Interest Rate Decision
15th April RCS House Prices/Construction Output

Companies Recommended

Barclays (HOLD) 2/3/2016

Performance of World Markets

29 Feb 2016

North American


Dow Jones CLOSE

S&P 500 Close
































UK 100 Index

DAX 30 Index






















Asia/Far East

Shanghai Composite


ASX 200

Hang Seng





















Source: Fidessa/Saxo Bank


 United Kingdom

Ten years after Tata Steel bought Corus (formed from a 1999 merger between British Steel & Hoogovens) paying £6.2bn the business has been brought down by weak steel prices. Tata confirmed it wants to close Port Talbot after accumulating £2bn of losses since 2010. Should the business disappear it could entail 15k-25k related UK job losses.

Part of the problem is Chinese steel dumping into the EU. Chinese steel imports cost €583 / ton against an EU average cost of €897/ ton. Currently, around one-third of annual global steel production is added to unsold inventory.

Ahead of the June 23rd referendum UK equities have seen sharp gyrations with high correlation to global oil prices. Large cap banking stocks have been weak post a cut in the Barclays dividend (from 6.5p to 3p). New regulations covering buy to let lending and changing taxes are likely to dent mortgage demand.


Rating agency Standard & Poor has cut China’s outlook to “negative” but maintained its AA- rating. It commented that the reform agenda is likely to proceed more slowly. S&P kept Hong Kong’s rating at AAA but likewise moved its outlook to “negative”. The move follows a similar recent downwards adjustment by Moody’s Investor Services.

China is attempting to soothe investor concerns that the government is not cutting bad debts in the Chinese banking system. The GDP growth rate, according to official data at 6.9%, is widely believed to be overstated. The concern is local investors continue to move money out of China. This has hampered efforts to move China into a consumer/ service economy.


Munich Re expects a profit of €2.3bn-€2.8bn in 2016 and will repurchase another €1bn of shares (c 3.2% of o/s share capital) before the 2017 AGM. Munich will raise the dividend to €8.25 per share for 2015. The 2016 result will be lower than the €3.1bn reported in 2015 due to intense competition in the reinsurance markets due to low-interest rates and excess capital.

United States

Debate raged over the Apple/ FBI face-off with the US tech industry lined up behind Apple. Apple had “objected” to a US court order requesting it to unlock the San Bernadino shooters phone. The FBI then broke the encryption. The issue of legal obstruction was unresolved but highlighted Apple “we are above the law” attitude.

The Dow has rallied from February 11th lows at 15,660 partly due to the Federal Reserve backpedalling on 2016 rate rise expectations (0.25% / QTR) to now 0.25% in Q3 2016 and maybe 0.25% in Q4. The Fed has noted other central bank moving to negative rates and the international slowdown/ equity gyrations.

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