In the U.S.:
- October retail sales were up 0.8% m/m versus September’s downwardly revised 0.1% decline. Gains were led by gasoline stations, auto dealers, department stores, and building materials/supplies.
Proxy firms ISS and Glass Lewis recommended the proposed Pebblebrook Hotel Trust (PEB) acquisition of LaSalle Hotel Properties (LHO). The move further bolsters the chances of the acquisition receiving a yes vote from shareholders. Lasalle’s CEO, Jon Bortz, commented that both proxy reports “clearly recognize the attractive strategic and financial rationale for the transaction, which serves the interests of shareholders of both companies.”
- Speaking to reporters at the White House, President Trump stated that China wants to make a trade deal, but that it was unacceptable yet. The US President’s remarks lacked details and the USTR’s Robert Lighthizer was quick to deny reports that the next round of tariffs was on hold.
- The Nikkei reported that Japanese corporate profits were on course to rise 1% in FY18 versus FY17’s 34% jump. Nikkei cited US tax cuts and the ongoing trade war as the main drivers to the slowdown.
The Hong Kong Lands Department announced that second residential site at the city’s former Kai Tak Airport was awarded to the Hong Kong financial conglomerate Goldin Group for HK$8.9B ($1.14B). The previous parcel at the site sold for $8.3B.
- UK PM Theresa May and EU reached a draft Brexit agreement, which was quickly met with swift backlash from members of her own party including Brexit Secretary Raab who stepped down and stated that the “integrity of UK was at threat and opposed indefinite backstop arrangement. As of the end of this week, it is expected that the current deal will not pass through Parliament in its current form and PM May could face a vote of no confidence in her leadership.
- Italy resubmitted its 2019 draft budget to the EU, but left its 1.5% growth target and its 2.4% deficit-to-GDP target unchanged. Given that Italy only made minor changes to the draft budget, the EU may decide to begin disciplinary measures against Italy.
- ECB President Mario Draghi stated that the ECB has seen a loss in growth momentum in both of the last two quarterly growth projections. Although the rest of his statement was largely positive, the inflation outlook could change the timing of the ECB’s first rate hike, expected at the end of summer 2019.
Amidst the volatility and uncertainty associated with the UK’s Brexit negotiations with the EU over its pending exit in March of 2019, UK majors British Land and Land Securities each reported half year results for the six months ended September 30. Broadly speaking, leasing activity and operating performance within their respective office portfolios continues to hold up well despite the macro uncertainties surrounding Brexit. Conversely, the retail portfolios of each continue to be impacted by a challenging retailing environment in the UK. British Land reported a 1.9% decline in the like-for-like value of its portfolio, while Land Securities reported a 1.4% like-for-like decline. In both cases, the office portfolio experienced a modestly positive change in value, while the retail portion of the respective portfolios drove the overall declines in total portfolio value. Adjusted EPS were broadly in line to modestly better than expected with British Land at 17.2 pence/sh and Land Securities reporting 30.3 pence/sh. Both continue to maintain strong and flexible balance sheets with British Land ending the period with a LTV of 26.7% and Land Securities at 26.2%.
The views expressed in this update are as of the date of this blog entry. These views and any portfolio holdings discussed in the update are subject to change at any time based on market or other conditions. The adviser disclaims any duty to update these views, which may not be relied upon as investment advice. In addition, references to specific companies’ securities should not be regarded as investment recommendations or indicative of the Adelante products, strategies, or portfolios.