Sell-off Continues: You Can Hide But Can You Survive? | Tesco and Ryanair under Focus

Posted by Naeem Aslam | 05/02/2018 08:11

  • The biggest sell-off for the equity markets in nearly two years is here
  • A 10% correction could take place as this was long overdue
  • Dallas Fed President Robert Kaplan and New York Fed President William Dudley to speak 

Prayers have been answered by the equities bears. The biggest sell-off for the equity markets in nearly two years is here as investors are reacting to surging global bond yields. Something which stood out last week for traders was that the sell-off was across all the 11 sectors in the S&P 500, something which we have not witnessed since 2016 (during the US election). Friday’s equity markets rout is likely to extend as the futures of the US stock indices are indicating.
 
However, there isn’t much to worry about because corporate profits are still rising and chances of US recession are remote. So this may only be a healthy pullback which the investors have been waiting for some time. A 10% correction could take place as this was long overdue. In other words, the long-term momentum for the equity markets is only easing off as these markets have been defying the Newton Law of Gravity.

Over in the US, after a strong US NFP data, in particular, the US wage growth number, has asserted more pressure on the Fed to adopt a policy which can address the rising bond yields. Dallas Fed President Robert Kaplan and New York Fed President William Dudley are going to provide more details about the Fed’s monetary policy stance and the question among the investors would be if the pace of the interest rate hike would be gradual or if the Fed is going to adopt a more aggressive stance.
 
Investors are trying to make a sense of Janet Yellen’s last interview with CBS during which she mentioned that valuations and real estate prices are overstretched. Does she mean that the stock market is a bubble? Perhaps, the upcoming Fed chairman Jerome Powell will have to address this question. Bond traders need to know if he is going to favour three or four interest rate hike this year.  

TESCO
Traders are paying attention to Tesco’s 2018 profit forecast of £1.58 for the year and the company’s intentions are that it would reinstate dividend of 2 pence per share. The corporate is shaking its management once again, the CEO of the merging group, Booker, will be taking over the company’s driving wheel. Charles Wilson, the current boss of Booker, is going to head the UK and Ireland operation for Tesco.
 
Insiders have a 0.01 percent stake. During the past six months, insiders have increased their holdings by 1.9 percent. The overall street consensus rating is equivalent to sell. During the month of January, Tesco's stock fell 3.6% while the peers dropped nearly by 2.9%.   
 
 
RYANAIR
Another big surprise from Irish carrier, Ryanair announced a 750 million euro share buyback. The message is clear for investors, the company has strong books. It is going to stand at its position by assuring investors that it is determined to remain Europe’s biggest low-cost airline. This is despite the fact that the staff cost would rise by 45 million euros this year as it has compensated its flight crews with higher wages. However, the potential threat remains for the airline as the pilot dispute is still not resolved. Nonetheless, the key ingredient which has helped the airline to fight higher fuel prices and higher wages is mainly due to the extra-dense Boeing 737.    

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