he UK has continued its slide this morning, with the FTSE
again suffering an Asian hangover amid concerns about Chinese growth and a rout on emerging markets that continues to build speed. Conversations with clients would certainly suggest that the focus is starting to shift away from the Fed taper and toward these issues in 2014.
Turkish and South African currencies plunged yesterday, with the former hitting a record low, a backlash to a reduction in US stimulus that had been tipped by many prior to December’s cut. Having lead the recovery back in 2008, emerging markets are showing a worrying potential to turn from hero to villain on current form, and seem destined to be a focus for investors in the short term.
Considering the hype surrounding Royal Mail shares in the last few months, taking the stock over 70% higher than its much debated IPO price, today’s results provided somewhat of an anti-climax with the stock opening slightly higher only to drift back near breakeven by mid-morning. The focus was always going to be on Parcel business, with letters clearly not a model for future growth in today’s technological age, as well as a sneak preview from UK mail who reported a 15% rise in parcel volumes for Q3.
The response from Royal Mail was mixed, which perhaps explains todays lack of cohesion in the price. On the one hand revenues were up 8%, but that was largely due to an increase in pricing and at the expense of overall volumes which remained flat for the period. A 3% drop in UK letter volume provides further headwind, and is not a trend that would logically see any reverse in future updates. Overall they sit relatively flat, still an astonishing performance from its debut, but likely to have to up their game a bit just to tread water at these levels.
Very few people welcome a call from the tax man, and in the case of Cairn Energy this is very much the case having today announced that they were recently contacted by the Tax Department of India in relation to income tax assessments for the year ending March 31st 2007. Although no further details have been released this uncertainty has led to the stock trading 4.5% lower this morning with Cairn having also been instructed to hold its shares in Cairn India, in which it has around a 10% stake.
Another equity on the slide is Syngenta AG who have been asked by two leading US grain groups to halt the commercial use and sale of two genetically modified strains of a corn that have not yet received approval in China. This has been brought about due to the Chinese authorities recently rejecting a number of US cargoes on the basis that they contained batches of the unapproved corn.
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