UK stocks closed lower on Thursday (5 September) as political uncertainty and ex-dividends offset the impact of overnight gains on Asian markets. The benchmark FTSE 100 index closed 0.55%, or 40.09 points, down at 7,271.17.
Next week will be an interesting one for macroeconomic events, and it starts off on Monday (9 September) when the Office for National Statistics releases its latest data on the UK trade balance, an important indicator of how the country is doing financially. Tuesday (10 September) will show how people in the UK are doing financially with the publication of the quarterly Average Earnings Index, while on Thursday (12 September) we will find out whether the deficit between the amount the United States government is spending compared to how much it is getting in has crossed the $1trn mark.
Housebuilders have been the focus of attention this week with two of the UK’s biggest players, Redrow (RDW) and Barratt Developments (BDEV), reporting their full year results. Both announced record pre-tax profits, but while Redrow’s shares went up, Barratt’s share price went down. As Brexit approaches and changes to the government’s Help to Buy scheme come into force, some investors fear this year could be as good as it gets for housebuilders. So for increasing growth to carry on, the real metrics the market is focusing on as a gauge for growth prospects are a firm’s average selling price (ASP) and number of houses completed. Redrow recorded a 13% rise in completions, while Barratt only recorded a 1.6% rise. In addition, Redrow’s ASP for private homes grew 2% to £389,500, while Barratt’s fell slightly to £312,000. So while on the surface both housebuilders appear to be in great health and highly profitable, the underlying picture tells a different story.
Policymakers at the European Central Bank will meet next Thursday (12 September) to debate whether or not they should cut interest rates further. Another cut could boost consumer spending in what is a weakening Eurozone economy, but there are concerns over the impact on the region’s struggling banking system.
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10 September – First quarter results on Tuesday from equipment rental giant Ashtead (AHT) will provide a good insight into whether it is seeing any signs of an economic slowdown on either side of the Atlantic. The firm gets around 90% of its sales and profit from the US, via its Sunbelt subsidiary, with the rest largely coming from the UK-based A-Plant business, but its shares have moved higher this summer even as manufacturing data has softened.
12 September – Interim results from ‘big four’ supermarket Morrisons (MRW) could show the firm is coping in the face of weaker consumer confidence and concerns over potential tariffs depending on the outcome of Brexit. Morrisons has been one of the main losers from the rise of German discounters Aldi and Lidl, but it has still managed to record 14 consecutive quarters of like-for-like sales growth, excluding fuel and VAT. Investors will be hoping for more like-for-like sales growth, as well as a 6% rise in underlying pre-tax profit and a 3.5% increase in the interim dividend when it reports on Thursday.
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