The FTSE 100 closed up 0.9% at 7,355,31 on Thursday (21 March) as ongoing uncertainty over Brexit hit sterling and boosted the relative value of the overseas earnings generated by FTSE companies.
There is little question over where the focus is likely to be for UK investors next week and that’s Brexit with Theresa May lining up a new vote on her deal after this week’s EU summit (see Economic update). Away from Brussels and Westminster, Monday (25 March) sees the release of the German Ifo Business Climate survey, amid growing signs of a slowdown in Europe’s largest economy. There is a reading of US consumer confidence out on Tuesday (26 March), followed next Thursday (28 March) by a final estimate of US GDP for the final quarter of 2018.
There were several significant announcements from the retail sector this week. After a big profit warning in December 2018, online fashion retailer ASOS (ASC) disappointed again on Tuesday (19 March) with its first half update, leading the shares to fall heavily. Although previously-reduced full year sales growth guidance was reiterated at 15%, margin pressure linked to discounting was reported. Hitting the 15% target will also require a material improvement in trading in the second half given sales only increased by 11% in constant currency terms in the first half. On Monday (18 March) retailer JD Sports Fashion (JD.) announced the £90.1 million takeover of its troubled rival Footasylum (FOOT). JD had previously increased its stake in the company to 18.7% in February but at the time ruled out making a bid. While on Thursday (21 March) Next (NXT) stock fell after rising into what turned out to be a solid but not spectacular set of full year numbers. Results for the year to January reveal group sales up 2.5% to more than £4.2 billion with pre-tax profits down 0.4% to £722.9 million, while Next’s final dividend of 110p took the total ordinary dividend up 4.4% to 165p.
The EU summit in Brussels on Thursday (21 March) lent some clarity to the Brexit situation. While she was widely expected to ask for a longer delay to Brexit if her deal failed, Theresa May requested a shorter extension to 30 June. The EU’s response, if a deal is agreed, with a vote likely next week, you can have an extension until 22 May. If it fails, you have until 12 April to come up with an alternative plan or it’s a no deal Brexit. A no deal outcome does not look like it is priced in at present and would likely result in volatility in sterling and domestic-focused stocks such as banks and housebuilders.
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26 March – Upmarket drinks mixer maker Fevertree Drinks (FEVR) is one of the biggest market success stories in recent years. The company has delivered impressive growth by tapping into demand for a premium mixer to go with expensive alcohol drinks. Concerns this growth potential had been exhausted dogged the stock in 2018 but a January trading update was reassuring, and investors will be hoping for more of the same with full year results.
27 March – First half results from housebuilder Bellway (BWY) will likely see focus on how the key spring selling season is going, margin performance and the direction of average house prices sold by the group. The Newcastle-headquartered group will also be expected to offer its view on the fall-out from Brexit, given the proximity of the results to the UK’s planned exit from the EU.
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