Tuesday, 26 August 2014

Doubts over 2014 Interest Rate Rise

The S&P 500 hit a 2 week high this week after weaker than expected retail sales figures pushed back expectations for the first rate hike.  Slowing auto demand suggests disappointing wage growth is to blame.  It’s a similar story closer to home with the Bank of England quarterly inflation report confirming the gap between inflation and salaries is widening. The market now expects the first rate rise in Q1 2015, although Barclays and Deutsche Bank still expect November to be the lift off date.

The battle between Carillion and Balfour Beatty continued this week.  After Balfour rejected a recent merger proposal, Carillion issued a reply to the rejection and brought forward its first half results. Decent results were overshadowed by a statement highlighting the significant cost synergies thought to be achievable by combining the two groups.  It’s now up to Balfour shareholders to persuade its board to come up with a creditable alternative to remaining independent or succumb to Carillion’s advances, creating a major new UK force in support services and construction. However, Balfour have since issued another statement reiterating their rejection of the merger proposal.  Carillion is now faced with the options of a hostile bid or walking away.

G4S, which has its head office in Crawley, released first half results which were better than expected. Underlying pre-tax profit was up 6% and organic revenue growth up 4.1%.  Improvements in both emerging and developed markets were partly offset by a rise in corporate costs.  A 25% increase in cash flow from operations suggests that management are slowly getting to grips with the company.

Centamin Egypt announced its first dividend to investors despite weak production volumes from its Egyptian gold mine.  It maintained full year guidance which suggests the company is confident delivering more output in the second half of the year. There was no update on the on-going court battle in Egypt over its licence to mine, but profit sharing with the Egyptian government is likely to begin in 2016.

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