LONDON MARKET Closing Update 14 July 2017

Market Commentary
Stocks in London finished the day lower with banking shares hitting a negative note after JP Morgan
and Citigroup kicked off the banking earning season with a fairly guarded outlook both big banks
headed lower in wall street early trading. Mining stocks were again the UK index leaders as they
continued to advance as the iron ore price hit a 10 week high on rising demand from China. In other
news Sky was lower today as hopes for a last minute deal with the culture sectary faded which
means it is highly likely that the Sky/Fox merger will be referred to the UK Competition & Markets
authority.
Luca Sarri Chartered MCSIWayne Collins Charterded MSCI
Today's Closing Update
U.S. shares edged higher in early trading as investors sized up quarterly results from
JPMorgan Chase, Citigroup and other big banks.
European and U.K. shares moved lower as investors digested earnings reports from Wall
Street banks and monitored developments from a meeting between the French and U.S.
presidents.
JP Morgan Chase has reported a 13% rise in second quarter profits to $7bn (5.4bn), lifted by
strong growth of loans and deposits. It was the steepest profit rise of the three big US banks
that reported quarterly results. Profits at Wells Fargo increased 5% to $5.8bn, but revenue was
flat. Citigroup reported a 3% fall in profits to $3.9bn as higher taxes and costs took their toll. The
bank also made greater provision for bad loans. The banks largely performed better than
investors had expected, but shares fell on lagging revenue in key trading units. Wells Fargo,
which has been working to move past a scandal tied to fake accounts, fell almost 2.5% in
morning trade. JP Morgan dropped 1.8% and Citigroup declined 1%.
EasyJet is planning to set up a new company in Austria to protect its European business after
Britain leaves the EU. The new airline, EasyJet Europe, will be based in Vienna. The airline
must have an air operator certificate in an EU member country to allow it to continue flying
between member states after Brexit. EasyJet said its application was "well advanced" and it
hoped to receive its licence in the "near future". The carrier said "nothing will change" from the
perspective of passengers, and that all the staff and planes that would fly for EasyJet Europe
were already employed and based in the other 27 EU countries.
HICL Infrastructure Co said it has signed an agreement to acquire a 35% interest in the High
Speed 1 Project. HS1 operates the UK's only high-speed rail link, comprising four stations
running 109 kilometres between London St Pancras International station and the Channel
Tunnel. In 2016, it carried over 20 million passengers. HICL said it is a member of a
consortium, alongside funds managed by Equitix Investment Management Ltd and third-party
funds managed by InfraRed Capital Partners, which has agreed to acquire HS1 from Borealis
Infrastructure Trust and Ontario Teachers' Pension Plan Board. The company said the
members of the consortium will acquire interests in HS1 according to their respective
shareholdings in the consortium. HICL and Equitix will each acquire 35%, with InfraRed owning
the remaining 30%.
With consumer expectations taking a hit, the University of Michigan released a report showing a
notable deterioration in US consumer sentiment in the month of July. The preliminary report
said the consumer sentiment index dropped to 93.1 in July from the final June reading of 95.1.
Economists had expected the index to edge down to 95.0. The bigger than expected decrease
by the headline index came as the index of consumer expectations slid to 80.2 in July from 83.9
in June. On the other hand, the report said the index of current economic conditions rose to
113.2 in July from 112.5 in June, matching the twelve-year high set in March. "Overall, the
recent data follow the same pattern repeatedly recorded around past cyclical peaks:
expectations start to post significant declines while assessments of current economic conditions
continue to reach new peaks," said Richard Curtin, the survey's chief economist.
Royal Dutch Shell has declared force majeure on Bonny Light crude oil exports in Nigeria,
meaning be temporarily exempt from contractual obligations. The Anglo-Dutch company's local
subsidiary, Shell Petroleum Development Company of Nigeria, made the declaration effective
from midday local time on Thursday, the group confirmed in a statement. This followed the
shutdown by operator Aiteo of the Nembe Creek Trunk Line, one of two pipelines that export
Bonny Light crude.
Acacia Mining will begin paying a higher royalty to the Tanzanian government for its
production of gold and copper of 6%, up from 4%, after new mining regulations were drawn up
following an export dispute. The miner will also pay a further 1% clearing fee on exports, which
was also recently imposed by the east African state. As well as lifting royalty rates for mineral
exports the new legislation stipulates that the government shall be "entitled to reject the
valuation in relation to the calculation of royalties, and where the government rejects the
valuation, it shall have the option to buy the minerals at the low value
Consumer price inflation in the US slipped a tad last month, possibly adding to doubts a third
US central bank interest rate hike at the end of 2017. The headline rate of US CPI slowed from
1.7% year-on-year in May to 1.6% for June, according to the Department of Labor. That was
shy of economists' forecasts calling for CPI to remain unchanged at 1.7%. Versus May, CPI
was flat. At the 'core' level, which strips out the more volatile food and energy components, CPI
rose by 0.1% on the month (consensus: 0.2%) and at an annual pace of 1.7% (consensus:
1.7%). In a preview of Friday's CPI release, economists at Citi had told clients that a fourth
downside miss in CPI would reinforce expectations in the market regarding the scant upside
potential for inflation.
Mitie Group said it has entered into a revised agreement to acquire the remaining 49% of
Source8 shares, which will see Source8 management remain at Mitie until 2019. Mitie said it
will pay a cash consideration of 3.0m for the remaining shares in consultancy firm Source8,
plus the issuance of 2.2m shares, of which 1.8m retained shares are conditional upon Source8
management remaining at Mitie until March 2019. Shares in Mitie were down 1.6% at 274p,
giving the 2.2m shares a value of 6.0m. Under the terms of the original agreement in
November 2014, when Mitie acquired the initial 51% of Source8, management was entitled to
exercise a put option in respect of their remaining 49% of Source8 shares at any time between
2017 and 2019 for a further consideration, payable in cash for a maximum of 12.5m.
Oil prices edged higher, and were on track for solid weekly gains following positive demand
signals, production issues in Nigeria and a reported decline in stocks.
Gold prices recovered, to try for their fourth gain in the last five sessions, a performance that
looks to hand the yellow metal a modest weekly gain even as riskier assets including stocks
remain in favor.

Market Close - 4:35pm

Market Index Change % Change

UK 100 7378.4 -35.1 -0.5%

UK 250 19,408.4 -10.0 -0.1%

GER 30 12,621.5 -19.8 -0.2%

FRA 40 5,230.2 -5.2 -0.1%

U.S. 30 21,569.93 +16.84 +0.1%

U.S. 500 2,452.6 +4.8 +0.2%

OIL (BRENT) 48.67 +0.25 +0.5%

GOLD 1,228.35 +10.77 +0.9%

UK Major Risers & Fallers - 4:35pm

Company Price Change % Change

Derwent London 2742 +89 +3.4%

Anglo American 1117 +23 +2.1%

Micro Focus 2089 +40 +2%

Sophos Group 439.85 -19.8 -4.3%

Barratt Developments 585.5 -15 -2.5%

Royal Mail 401 -10 -2.4%

Reported Economic Data

Time/Date Previous Forecast Outcome
Company Price Change % Change

1:30pm: U.S. CPI m/m -0.1% 0.1% 0.0%

1:30pm: U.S.Core CPI m/m 0.1% 0.2% 0.1%

1:30pm: U.S.Retail Sales m/m -0.3% 0.1% -0.2%

2:15pm: U.S Capacity Utilization Rate 76.6% 76.7% 76.6%

Interbank Spot FX Rates - 4:35pm

Pairing Rate % Change

GBP/USD 1.3087 +1.14%

EUR/USD 1.1458 +0.53%

GBP/EUR 1.1424 +0.63%

USD/JPY 112.53000 -0.53%

USD/CHF 0.9646 -0.27%

GBP/JPY 147.3330 +0.51%