The FTSE 100 enjoyed strong gains this afternoon as sterling came under pressure and after the European Central Bank said despite ending its quantitative easing programme it would not raise interest rates until mid-2019 at the earliest. By the close the index of leading UK shares was up 0.8% at 7,765.79.
Next Tuesday (19 June) US building permits data is released. It's an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building; Next Wednesday (20 June) US crude oil inventories are out. There is little expectation the Bank of England will increase interest rates when it meets next Thursday (21 June) after two recent key releases revealed some worrying signs for the UK economy. The Office for National Statistics reported the biggest monthly fall in output for the UK manufacturing sector for five years and a widely-followed survey from recruitment firm ManPower showed hiring intentions for UK firms were at their lowest level since 2012. Next Friday (22 June) all the focus is likely to be on the OPEC meeting.
The housebuilding sector was in the doldrums earlier this week as releases from Crest Nicholson (CRST) and Bellway (BWY) on Tuesday (12 June) added to fears the sector’s level of profitability may have peaked. Crest Nicholson fell on downbeat first half results and Bellway sinks 2.4% to 33.26 on a mixed quarterly update. They were followed lower by peers such as Persimmon (PSN) and Redrow (RDW). A common feature of both announcements is negative guidance on margins amid stalling house prices at the top end of the market. For the time being these issues are concentrated at the top end of the market. In its latest trading update Bellway mentioned offering incentives on premium priced properties while Crest Nicholson has a higher average selling price than its peers.
The housing market is clearly interconnected and margin issues could start to filter down the property chain. This is a key issue to monitor in forthcoming updates from the industry. London-based Berkeley (BKG) reports its full year results on 20 June, followed by trading updates from Persimmon and Barratt Developments (BDEV) on 5 July and 11 July respectively and first half numbers from Taylor Wimpey (TW.) on 31 July.
Oil producers’ cartel OPEC will hold its latest meeting in Vienna next Friday (22 Jun), an event that could have a major influence on the direction of oil prices. Oil prices have already started to retreat from recent highs above $80 per barrel ahead of this summit. Why? There is speculation leading member Saudi Arabia could boost its production amid disruptions to supply in Venezuela and Iran.
The country may not be appearing at the World Cup but investors seeking to gain exposure to the Dutch stock market could look at iShares AEX (IAEX). Which tracks the performance of the Amsterdam stock exchange for an ongoing charge of 0.3%.
19 June – Investors will be looking for Ferguson (FERG) to have sustained the momentum it enjoyed in the first half of its financial year when it updates on third quarter trading. The US-focused distributor of plumbing products and other building materials reported first half profit ahead of expectations in March and unveiled $1bn special dividend.
21 June – Electronics retailer Dixons Carphone (DC.) will be hoping to break a streak of negative news when it posts its full year results. Just weeks after downgrading expectations for the current financial year the company revealed a significant breach to customer data on 13 June. The market will be watching closely to see if there is any further deterioration in the trading outlook.
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