The FTSE 100 fell on Thursday as British Gas owner Centrica (CNA) warned on profits after losing 823,000 energy supply customers. At the close the index of leading UK shares was down a handful of points at 7,417.24.
Next Tuesday (28 November) the results of the latest stress test of UK banks is announced. The test, carried out by the Bank of England, is aimed at determining how well equipped banks like HSBC (HSBA), Barclays (BARC), Lloyds (LLOY) and Royal Bank of Scotland (RBS) are to deal with a big financial shock. The same day members of the Bank’s Monetary Policy Committee are set to testify before MPs on the economic outlook (see Economic update). Next Wednesday oil producers’ cartel OPEC is set to meet and is widely expected to extend current curbs on production to support prices. If it fails to do so oil could fall sharply. The second estimate of US GDP growth for the third quarter is also out on Wednesday. The first reading came in at 3%.
The housebuilding sector was in focus this week as housing was the dominant theme in Chancellor Philip Hammond’s Budget on Wednesday (22 November). Although Hammond pledged £44bn to help build 300,000 homes a year by 2020, a lack of detail has gone down poorly with investors. In particular, there was no comment on extending Help to Buy beyond 2021. There was also vagueness in terms of planning changes and an investigation into why housing starts are lagging planning permissions (potentially implying housebuilders may be hoarding land). There was even a suggestion the Government might use compulsory purchase powers to address the issue. The UK’s largest housebuilder Barratt Developments (BDEV) was the biggest faller in the wake of Hammond’s announcement. There were some brighter spots for the sector, including investment in delivering a skilled construction workforce and no stamp duty for first time buyers on homes worth £300,000 or less. The changes to stamp duty could also be good for estate agents if they encourage more prospective buyers to go ahead with purchases. The UK’s leading agent Countrywide (CWD) saw its shares rise following the Budget announcement.
After the Office for Budget Responsibility slashed its UK growth forecasts alongside the Budget (22 November) it will be interesting to hear the take of Bank of England Governor Mark Carney and some of his colleagues on the economic outlook. They are set to give their view on the economy and the likely direction of inflation when they testify before MPs next Tuesday (28 November).
Investors looking to add diversified exposure to the debt of global governments could consider an exchange-traded fund. iShares Global Government Bond (SGLO) offers exposure to bonds from Canada, France, Germany, Italy, Japan, the UK and US for an ongoing charge of 0.2%.
27 November – The pressure on Trakm8’s (TRAK:AIM) profit should lift now that a spell of heavy investment in new products and marketing is coming to an end. Investors will be looking for evidence of this shift in circumstances when the company reports half year results. The company makes telematics kit, often used for navigation and monitoring in cars, and these areas have potential, but unpredictable insurance demand remains an area to watch.
28 November – Investors will be looking for further signs of stability in the retail business and progress from its fast-growing veterinary business when UK pet specialist Pets at Home (PETS) posts half year results on 28 November. At the first quarter update (8 Aug), Pets at Home pleased with news of 2.7% like-for-like revenue growth, buoyed by services revenues including joint venture vet practice income and continued recovery in merchandise trading.
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