22 February 2019
A negative reaction to full year results from Centrica (CNA) and BAE Systems (BA.) plus a weaker US open contributed to a 0.85% fall in the FTSE 100 on Thursday (21 February) as it closed below the 7,200 mark.
Next Tuesday (26 February) the Bank of England Governor Mark Carney and his colleagues are set to give members of Parliament’s Treasury Committee an update on their expectations for inflation and economic growth in the UK. Next week sees further focus on Brexit with UK MPs set to debate the issue and vote on possible amendments to alter the direction of the process on Wednesday (27 February). In Next Thursday (28 February) delayed US GDP figures for the fourth quarter of 2018 are released (see Economic update). On Friday (1 March) the latest purchasing managers’ index data for the US manufacturing space is published.
The banks came to the forefront this week with Barclays (BARC), HSBC (HSBA) and Lloyds Banking (LLOY) all reporting their 2018 results. HSBC was up first on Tuesday (19 February) and was a notable loser. Unlike most of its peers there was no increase in the dividend and pre-tax profit at $19.9 billion was more than $1 billion short of the $21.3 billion which had been pencilled in by analysts this was thanks to a tough end to the year linked to global trade concerns, weak financial markets and rising impairments. Lloyds was more popular with investors on Wednesday (20 February). Net income rose 2% to £17.8 billion in the year to December, in line with analysts’ forecasts, while the net interest margin – the difference between what Lloyds pays its depositors and what it charges on loans – actually increased slightly to 2.93%. The company also hiked the dividend by 5% to 3.2p per share and increased the share buyback programme from £1 billion to £1.75 billion. Barclays was popular as its annual dividend more than doubled to 6.5p per share, helping investors overlook flat profit in 2018, with performance held back by litigation charges.
Delayed figures on US GDP growth for the fourth quarter of 2018, now scheduled for next Thursday (28 February) could have a material impact on the global financial markets. Thanks to the shutdown in Washington a series of financial reports produced by federal agencies have been held up, including GDP estimates from the Bureau of Economic Analysis. The release follows the postponed release of December US retail sales which fell 1.2% for the largest monthly decline in nine years. Consumer spending really matters as it accounts for the majority of overall economic activity in the US.
Investors looking for exposure to a selection of continental European stocks with strong dividend growth track records could consider exchange-traded fund SPDR S&P Euro Dividend Aristocrats (EUDV). The ETF has an ongoing charge of 0.3%.
28 February – British Airways owner International Consolidated Airlines (IAG) reports its full year numbers at a time of flux for the wider industry. Focus is likely to fall on guidance for fuel costs and what it intends to do with the funds saved by ditching a potential bid for low-cost long-haul carrier Norwegian Air. Investors will also be watching to see if it can hit a targeted increase in operating profit of €200m.
28 February – Aerospace engineering firm Rolls-Royce (RR.) will be looking to show signs its job cuts are having an impact on costs when it reports its 2018 results. The expected impact of recently new orders for planes on demand for its engines is also likely to be in the spotlight along with its latest thoughts on the impact of Brexit.
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