Garry White, chief investment commentator, looks at the market-moving events that have shaped the UK equity markets this week (25 to 29 June 2018).
The FTSE 100 traded little over the week, despite a rally in oil prices. There was more bad news from the retail sector after The John Lewis Partnership warned on profits and Carpetright posted a £70m annual loss. There was some positive news for defence giant BAE Systems. Donald Trump continued with his trade rhetoric and the Shanghai composite index entered bear market territory.
Economics
UK first-quarter GDP growth was revised up to 0.2 per cent quarter-on-quarter from its initial reading of 0.1 per cent. This follows changes in its method of measuring construction output.
Germanys economic boom times are over and Europes largest economy is on the way to a more normal growth path, Ifo economist Klaus Wohlrabe said after its latest survey showed a deterioration in German business confidence.
The People's Bank of China (PBOC) cut the reserve requirement rate – the amount of cash that some banks must hold as cash buffers – by 50 basis points from 5 July. The reduction releases new funding for mid-sized and small banks to increase lending to small businesses, the PBOC said.
Geopolitics
US President Donald Trump appeared to make a key concession to China in the escalating trade war. Unveiling a review into Chinese investment in US technology companies, the president dropped harsh restrictions on Chinese investment into the US. Instead, he will expand the use of the Committee on Foreign Investment in the United States to restrict Chinese investments. The news prompted a rally in US equities.
Garry White argues that investors are hoping Trump is playing tactics here.
Moodys cautiously welcomed the debt relief package offered to Greece by its creditors last week. Eurozone finance ministers agreed debt relief for Greece on Friday, to smooth its return to market financing once it exits its bailout in August after eight years of surviving mainly on loans from the bloc.
Emerging markets
The trade war is hitting developing economies worldwide and the MSCI Emerging Market Index fell 2.7 per cent in sterling terms over the week by mid-session on Friday.
Following the re-election of Recep Tayyip Erdoğan as Turkish President, John Redwood, Charles Stanleys chief global strategist, looks at issues on the borders between the EU and the Middle East here.
Technology
Online cab group Uber won a legal bid to restore its operating licence in London after a judge overturned an earlier decision and granted the ride-hailing app a 15-month permit. At a hearing, its lawyers convinced England's chief magistrate that it had improved its operations with a raft of reforms.
Facebook reversed a controversial ban on cryptocurrency adverts, prompting speculation that the tech giant may be planning something in the industry. Last month the group founded an exploratory blockchain group and there has been speculation it may be interested in buying digital currency exchange Coinbase.
Amazon.com agreed to buy PillPack, an online pharmacy that pre-sorts medications into different doses and handles both refills and renewals. PillPack delivers medications to customers and specialises in customers who take multiple prescriptions per day. The news sent shares in US listed pharmacies lower.
Energy
The oil price jumped following a steep fall in US inventories. Brent Crude futures rose 3.7% over the week by mid-session on Friday to trade at around $78.35 a barrel. The move put the oil price on track to register gains for four consecutive quarters.
Oil behemoth BP appeared to look “beyond petroleum” after revealing it will buy Britains largest electric vehicle charging firm Chargemaster. It plans to use its technology to roll out ultra-fast chargers across its 1,200 petrol stations in the country over the next 12 months. BP reckons there will be 12 million electric vehicles on Britains roads by 2040, up from around 135,000 in 2017.
Garry White looks at prospects for electric vehicle manufacturers such as Tesla here.
Media
The Walt Disney Co gained regulatory approval in the US for its deal to buy most of Twenty-First Century Fox, removing a major obstacle to the mega media tie-up. Disney must sell off 22 regional sports networks in order to proceed with the sale, the US Department of Justice (DoJ) said.
Supermarkets
Tesco announced the end of its Brand Guarantee scheme, which offers customers price matches on branded goods.
Other retail
The unlisted John Lewis Partnership, which owns John Lewis department stores and the Waitrose supermarket chain, warned that profits in the first half of the year will be "close to zero". Management blamed heavy investment and said its Waitrose chain would close five of its 353 shops.
Carpetright swung to a £70.5m annual loss, driven by weak trading and the costs of a major restructuring of the business that includes the closure of 92 stores. The retailer said it had been “a very difficult year” as it reported a 3.6 per cent fall in sales at its established UK stores.
Swedish listed H&M saw quarterly profits fall by more than a fifth, hit by high street competition. Management said it needed to cut prices further to help shift growing piles of unsold merchandise over the summer.
Consumer
Greene King shares slipped sharply after it was hit by weather systems such as the “Beast from the East”. Adjusted profits fell 11.2 per cent, but the pub chain said its performance had improved since the start of this financial year, with a 2.2 per cent rise in like-for-like sales over the last eight weeks.
Shares in takeaway food app Just Eat fell after management gave a more cautious outlook than expected at an investor meeting. The group did not give any guidance for 2018 and warned that profits could be subdued due to high investment costs.
Cruise operator Carnival cuts its guidance, blaming growing fuel costs. However, quarterly profits beat expectations.
Tobacco group Imperial Brands revealed it was investing in UK biotech company Oxford Cannabinoid Technologies. The move comes as campaigning to allow marijuana products for medicinal purposes gathers pace.
Transport
Shares in African budget airline Fastjet slumped after management warned the company could go bust unless it obtained new funding. It later announced plans to raise at least $10m in a share placement. The airline, set up by easyJet founder Sir Stelios Haji-Ioannou, flies in several African countries including South Africa, Tanzania and Zimbabwe.
Stagecoach shares fell after its dividend was cut following the renationalisation of the East Coast line earlier this year. The shares hit a five-year low.
Outsourcing
Shares in Serco fell after management warned it expected revenues will fall amid challenging market conditions.
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